Property Analysis in Sarasota, FL

[Andrew Connor]

I'm 27 and live in Philadelphia, PA. I've been wanting and planning to begin my REI career by house hacking in the Tampa area, so I've been saving money for a down payment and researching the market and area.

However, an opportunity came up for a property in my hometown of Sarasota, FL. It's a 1/1 condo in a desirable area with a Zillow estimated rent of $1450. Asking price is 125k, but I may be able to get it a little lower as the current owners are family friends.

After running it through a calculator, it appears the deal would cash flow at $236/month and have an 12.6% CoC and 6.8% Cap rate.

As a little more background for me, I have good credit at 760+, and some money saved up, but not enough for a 15% down payment. Would likely have to borrow from family/friends or use credit to make up the difference.

I'm very serious about this opportunity and don't want to be paralyzed by fear/uncertainty.

Does this deal seem worth postponing house hacking plans?

Does anyone know of down payment assistant programs for investment properties?

Thanks,

Andrew

[Immanuel Sibero]

A search of "cap rate" right here on BP will show the misconceptions surrounding cap rate.

IMO, context is important here. When someone mentions "cap rate" in a single family rental investment scenario, there would be at least one post stating that cap rate is totally irrelevant. There are two contexts where "cap rate" is frequently thrown in - one is "performance" and the other is "valuation". When cap rate is used as a performance metric (i.e. NOI/Cost), I don't know about you but I see the use and the relevance in comparing rental house A vs. rental house B. If house A has a higher cap rate then house B, then house A performs better than house B. Stated another way, house A produces more NOI for a given Cost (i.e. more efficient in squeezing NOI out of Cost). Now, within the context of "valuation" then YES... cap rate is irrelevant in rental houses because rental houses are valued using recently sold comparable houses where some of them are not even rental houses (i.e. they do not even generate NOI).

To say that "cap rate" is totally irrelevant in SFR's is ignoring the fact that some (actually way too MANY) investors use the term cap rate within the "performance" context.

Now if we could have a different name for "cap rate" as it is used within the "performance" context... oh let's say "operating yield"?? Maybe this will help eliminate all these misconceptions?? After all the formula of Operating Yield is NOI/Cost... (hmm, where have I seen THAT before?)

Cheers... Immanuel