those who are buying multi family at 5 cap, what's your plan?

[Allen L.]

Hi all, with cap rates in most medium sized markets at 5 cap, and those that are transacting around this cap rate, what is your plan? Are you looking to hold long term and defer as much expenses as possible, wait for cap rate to compress further, wait for inflation to carry rent higher, and are you actually decently positioned CF wise? I am looking at some apartment complexes and I can't see a path to profit for long term buy and hold at the current loan rates and spreading realistic capital expenditure across each month, UNLESS rents rise fast, which is possible, if we continue down the path of labor shortage. Am I just nuts and miscalculating or is it kinda impossible to buy in at 4-5 cap in general despite the low interest rates?

[Michael Le]

What were you buying at previously, cap rate wise? A few years ago 7 caps were more common but so was 5% interest. Nowadays you see more 5% caps but the interest rates are also around 3%. The spread is about the same. So cash flow for a lot of deals might have changed some but not too much as long as you find the right deals. But that caveat is no different than it was 5 years ago.