Caledonia, MI · Member since 2016 · 34 posts · 4 votes
I am a owner of 4 rental properties in West Michigan and am going to offer on a multi-family home in Heritage Hill Historic District, in Grand Rapids, MI. I am looking for local investors or investors that know this market's input on the CAP rate he or she uses in their offer calculations. Other forms of info use is also welcomed! Thanks in advance!
@Account Closed the range is there because of risk. Lower risk areas or lower risk properties (A or B properties) would have a lower cap rate because they are less risky. C or D areas or older properties would need to have a higher cap rate in order to sell. It's based on the risk / reward...
@Bryan Sandera from what I have seen over the last few months 7-9% cap rate is the average right now in Grand Rapids. Anything over 9% is rare or a really good off-market deal.
Thanks Jake! I am looking at the numbers of some of the houses on Redfin that are multi family. The cap rate I am figuring is a lot lower. Its either they are way over priced or I am not doing the right calculation. Is the 7-9% cap rate you stated with an 11% management fee included?
Regarding fixed expense, taxes and insurance will always be a factor in calculating cap rate. Vacancy, property repairs and owner paid utilities are additional required factors but can fluctuate throughout any given year based on market conditions, property age and configuration and tenant mix. Variable expenses such as property management and capital repair allowance should also be a part of a realistic calculation leading to Net Operating Income which forms the basis for calculating cap rate.
@Bryan Sandera I agree with Jake however I would be shocked if you find something in Heritage Hill for better than 7%. I can email you my form if you reach out tim @ rentupm.com
@Bryan Sandera from what I have seen over the last few months 7-9% cap rate is the average right now in Grand Rapids. Anything over 9% is rare or a really good off-market deal.
Seriously, a 7-9% cap rate range? So a NOI of $25,000 would sell for $278,000 to $357,000? A 28% difference?! Can you provide a 7% and a 9% verifiable cap rate comp?
@Account Closed the range is there because of risk. Lower risk areas or lower risk properties (A or B properties) would have a lower cap rate because they are less risky. C or D areas or older properties would need to have a higher cap rate in order to sell. It's based on the risk / reward...