Apartment complex selling at 6.52% cap rate

[Alan Bostick]

Hello! I am looking to purchase a small apartment complex, they want it at 6.52 cap rate, 5.25M asking.   (I think) I vaguely remember something being said that if you make a purchase with your interest rate higher than the cap rate it will eat most if not all of the profit. With rates being 7-8% would this be a wise point in entry for this asset type? I have only taken  preliminary look into this specific property. 

[Scott E.]

There is soooooo much more that goes into underwriting a multifamily deal than the cap rate vs the interest rate.

My advice is that you spend the next 3-6 months getting educated on multifamily investing prior to spending a penny on a multifamily deal, let alone spending over $5M on a deal.

And yes if you are buying a 6.52% cap deal and your debt is at 8%, the deal will not cash flow. It will lose money every month. But that factor doesn't single handedly make it a bad deal.