Lowest CAP Rate you would accept

[Joe Zinger]

What is the lowest CAP Rate that you would consider for a Single Family Home rental investment property? Thanks in advance for you collective knowledge Joe

[Andrew Johnson]

@Joe Zinger Similar to @Account Closed my sentiments are that it's really market dependant. The error of using "cap rate" with an SFR aside, the valuation methods are different. I could be a "horrible" cap rate by buying the home next door to me at 70% of fair market value. I'd probably end up being cash-flow negative. But I would still do it. It would (in my opinion) still be a great investment thanks to the built-in equity. And I would just stomach the negative cash-flow. I'd hope that Prop 13 and rising rents would eventually help the cash-flow and leave me a happy camper with equity and cash-flow. With an SFR I don't need to look at NOI and prevailing cap-rate to posit a value, I have comps for that. Anyway, the investment landscape where I invest is materially different. There I would love to see projected 10% cash-on-cash return but I really focus more on the micro-area and the specific property. If I believe in those latter two items I'm not going to let 7% vs. 10% dissuade me. Nor would I let 15% or 20% CoC projections coax me into going to an area I'm not comfortable with or don't believe in. Anyway, that's enough rambling for now.