What’s An Acceptable Cap Rate

[Joseph Platyan]

What cap rate do you aim for in this market? Is there a cap rate that is too low for you to consider i.e nothing below a 4?

[John Warren]

@Joseph Platyan I think it is hard to make sense of something that is much below a 6 cap at initial purchase. I only purchase value add deals personally, so I am looking for deals that will be able to perform at 9 or 10 caps within a year of my re-positioning play. I am under contract on a 19 unit deal in Berwyn right now that was advertised as a 6.4 cap, but the actuals are saying it is probably a 4! The banks don't even want to finance deals that are this thin.