Do 7-10% CAP rates on Loopnet sound too good to be true?

[Filippo Baldo]

Hey people, I'm just a newbie and was looking around Loopnet.com and saw many properties (selling for 7-8 figures) with crazy cap rates like 7-10% which means 15-30% cash on cash return.
Am I missing something? Sounds like there are interesting properties and nobody is catching on em? Enlighten me, please.

Saw one with very good tenants (med and pharmaceutical field which are safe industry).

[Greg Scott]

The real question is that are those legitimately 7-10% cap rates?  The answer is almost certainly "no".  (Marketed 10 caps, particularly on LoopNet, haven't existed for over a decade.)  Large cap rates are often based on pro-forma projections, not actual performance.  Even when they show a T-12 performance, many brokers make "adjustments" for this or that.  

Also, you may be assuming the property has no deferred maintenance, which is a dangerous assumption.  One way some owners boost short-term financials prior to a sale is to stop doing any preventative maintenance.  If you bought one of those, your maintenance costs would naturally be higher and you may also have to invest a lot of money just to get the property back to good condition.