What is the cap rate target for a duplex rental ?

[Ernesto Carozza]

To current and previous multi family real estate investors, what was your target cap rate when evaluating a possible investment property? I am aiming between 8-10% but would love some feedback !

[Dan Biber]

For a larger multi-family deal, I forecast the exit (reversion cap rates) only. Since we typically acquire value-add multi-family assets, going-in cap rates don't mean anything. The better financial return metrics would be cash-on-cash, IRR, equity multiple. What the financial return metrics to focus on is really based on what your goals are. Short term hold, long term hold, only your equity, other investors in the deal, etc.

For smaller multi-family deals, I mainly focus on cash-on-cash returns.  Anything over 15% cash-on-cash, I'm satisfied with.

Thanks,

Dan Biber