It's not possible to get a decent ROI with a cap rate <10%

[Nick Rose]

Ok, I suppose it is possible - I'm just hoping to get some experienced investors' take! I do have capital that I'd like to put to use in an apartment building in the roughly 400K-700K range, however I can't seem to make the numbers give me a decent ROI. This very well may be mission impossible. I've run some numbers on several market rate deals, and below is roughly what I've seen:

Purchase price - 700K

Cap rate = 8%

NOI = 56K

I'd need a loan and property management.

Property management ~7800/year

Loan (5%, 20 year amort, 20% down) = 44.3K/year

Cash flow = 56,000-7800-44,300 = $3,900/year

This assumes NO capital expenses and assumes the current owner's maintenance numbers are spot on.  

How is everyone making this work for them? Perhaps others are finding 11%+ cap rates in good areas? 

[Jeff Greenberg]

In this market we are in, it is difficult to find stabilized deals that make sense. The beauty of CRE is to be able to add value to a property. Putting capital in to increase your noi, increases the value. It will take time to get the ROI just from cash flow. You can cash out refi, or sell to access the equity that you have created.

In this strong MF market, we only buy value add opportunities.