Is 11% Cap Rate a Good Deal with Current Interest Rates?

Is 11% Cap Rate a Good Deal with Current Interest Rates?

Rental Property Investor · Santa Clarita, CA · Member since 2019 · 16 posts · 3 votes

If your goal is cash flow to retire early, would you buy an 11% Cap rate deal with current interest rates? (C-class neighborhood and property)

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    2y

    If it is a commercial property, that is a very attractive Cap Rate. I would be pouring a lot of effort into underwriting with the potential to acquire the property.

    Since I have not seen Cap Rates on commercial properties anywhere near that, I assume you may be referring to a single family, duplex, tripex, or quad. In that case Cap Rate is really not a relevant metric.  The deal may be great or terrible at that Cap Rate.  I would want to know if there was any equity capture and cash-on-cash returns after rehab.

  • Scott WolfPro Member
    Lender · Boca Raton, FL · Member since 2014 · 1k+ posts · 956 votes
    2y
    Quote from @Elena S.:

    If your goal is cash flow to retire early, would you buy an 11% Cap rate deal with current interest rates? (C-class neighborhood and property)


     If it's a C-class neighborhood and property, it may not be the best deal.  Is it in the path of progress at all, what's the tenancy, what does future cap-ex look like?  While it looks good on a spreadsheet, there are too many unknowns to answer properly.

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