What cap rate should I buy multi family at?

[Reinhard Kurzen]

Hello, 

I am looking at buying a 25 unit in Spokane,WA and I am wondering about cap rates. Often times I see sellers saying 8% cap rate (proforma). The property I am looking at needs a lot of work and tenant turnover and thus has potential for upside. However, the property is currently only performing at about a 4.25% cap rate. With putting in the necessary rehab costs and increasing the rents the property could be performing at about 7.5-8% cap rate. The idea would be to refinance at this point and pull out my down payment and rehab costs. Is it crazy to buy at this low of cap rate or do you see this often? I am wondering if I should be buying at a higher cap rate. I have already talked the seller down quite a but for repairs, that I am getting credits for at selling, to cover most of the rehab costs. This will make it easier to refinance and pull out my 20-25% down payment. Any insight you can give on typical cap rates to buy at and increasing cap rates would be great. Also looking for good videos or podcast episodes to listen to on the subject.