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Updated about 3 years ago,

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Jason Malabute
  • Accountant
  • Los Angeles, CA
668
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1,422
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multi family exit cap rates

Jason Malabute
  • Accountant
  • Los Angeles, CA
Posted

It is becoming more popular to underwrite deal and calculate the terminal cap rate by taking the current market cap rate and add .1% for every year it is held to make deals work. For example, if the market cap is 5.5% and you plan to hold the property for 5 years then the exit cap would be 6%. My question is under that model what would you do if we go into a downturn and cap rates decompresses by more than the .5% projected or if the cap rates decompressed by .5% before the 5 years are up?

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