Scranton PA Cap Rates

[Lizbeth Vaquero]

Im evaluating a package deal (3 SFH/1lot) but my numbers were not looking the best, I spoke with another fellow investor who mentioned I should NOT be looking into ARV but rather concentrate on CAP RATE , he said anything less than 14% cap rate is unacceptable. Any thoughts on acceptable cap rates for Scranton area??

[Kate Daye Ruane]

In my opinion it depends also on the quality of the properties. People who only take a 15% cap are also often times comfortable with a shabbier property and location and not focused on resale value or ARV in lieu of upfront cash flow. You could find yourself in situations where a home makes great money, but in 5 years you're spending that earned income plus more on replacing roof, HVAC, electrical, etc.
I wouldn’t purchase below a 10% myself, but I also wouldn’t exchange quality for cash flow. Weigh both. Our area has been known to commonly hit a 10cap on investments and great deals score you higher. A bulk sale or portfolio should be listed at a better cap rate than a 10 IMO. 13-14% would be reasonable. Additionally, SFHs should have a higher cap than multis due to lower taxes and less (to no) operating costs or utilities. 14%+ can be common on these.