CAP Rates for new markets

[Jacob Perry]

Hello! I am curious to know any investor strategies for analyzing CAP rates in certain markets to accurately calculate what should be the leveraged ROI to pitch to other buyers/investors. I am currently a wholesaler in the Nashville market, but my company is expanding out into KY, VA, AL, and MD. Thanks in advance.

[Luka Milicevic]

It helps to ask around what cap rates people are expecting in your target markets. Brokers, agents, other investors. 

Don't ask investors what they are looking for, ask what ACTUAL cap rates are. Brokers and agents will be more helpful as they have probably closed more deals across the board. You need to get in touch with a broker/agent that actually does larger multi fam (5+ doors) in order to properly get an understanding of local cap rates. 

An agent/broker that does single family homes/small multi is going to be mostly guessing. 

Remember, cap rates are just one piece of the puzzle. I sold an apartment complex with a 3.2 cap, but it had a projected cap of 9 with the needed repairs/mgt boost. If it's a value add, that needs to be factored in as well.