acceptable cap rate for you as an investment

[Marylynn B.]

Hello everyone!! 2013 averaged 9 percent cap rates for commercial properties.  I am interested to hear what type of cap rates you find acceptable in determining your offer price?

I have found depending on the property ( if a lease is in place and condition) constitutes the variation for me...however only by a small amount.  What say you? As always love to hear your thoughts!

[Jesse Waters]

8.5% or higher seems to the the spot for me where the numbers really start to look good. When I run the numbers I like to see what it would look like fully financed, say at 6% for 30 years, get a DCR for the whole purchase price and go from there. Even if I have to come up with a creative strategy for the down payment a higher purchase CAP will help when it comes to re-fi. If a property has a NOI of $50k, a 10 CAP gives it a value of $500k, my lender generally assigns a CAP around 6-7%. So a 7% CAP on the same NOI is a value of $714k. Using that method I can re-fi out after a year still at 75% LTV (for the original purchase price) & pull my cash back out of the deal.