Are 2% deals realistic for multi family?

[Barry Joel Barr]

I'm from Chandler Arizona looking at property in Phoenix. The average cap rates on multi family seems to be ranging 5-7% from what I've seen on loopnet. Don't have access to the MLS basically have to wait on my realtor to send me a property.

I was just sent 4plex around 500k NOI 35k 7% cap not exact numbers, but this definitely isn't a 2% monthly ROI not even 1%. If I buy a property for 100k I should be looking for rents 2k a month for a 2% ROI. A 500k dollar property should rent out for 10k? The average rental rates in Phoenix can range anywhere from 500-1000$ What should I be realistically looking for?

[Mike Roy]

Originally posted by @Bob Woelfel:

@Barry Joel Barr The 2% metric is worthless if for example you are paying for water, electric, gas and your taxes are crazy high.  Then your expenses will completely eat into the gross rents and your property might cash flow significantly less than the property next door that was maybe a 1% deal.  Stop using this metric for anything more than a quick test to see if you should go further. 

@Bob Woelfel nailed it!  Many times, the hidden costs of vacancy and turnover are  also much higher in 2% properties than in 1%.  Those tend to be the truly deceptive 2%'ers.  It all comes down to the kind of distress that resulted in 2% pricing.  If the building or its owners are distressed, but the market is good, I'll take that all day.  The reverse, forget it.

Once you really know your market, you'll know what an average deal looks like.  Maybe it's 1%, 1/2%, 2% - whatever.  The point is that once you know, you'll also know value when you see it.