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Updated over 2 years ago on . Most recent reply

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18
Posts
5
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William Barr
  • Investor
  • Atlanta
5
Votes |
18
Posts

Cap rate determination - Section 8

William Barr
  • Investor
  • Atlanta
Posted

How is a commercial lender going to determine the cap rate of a SFH section 8 portfolio? Say I built a portfolio of 10 SFH rentals, all rented via section 8. Say each house is bought individually for $75k (in a non-appreciating market) and portfolio NOI is $100k. If I took this portfolio to a commercial lender, assuming I've stabilized rents and all tenants are locked in a 12+ month lease, how would they value it?

Would it be based on comps - and therefore ~$750k?

If based on income, what cap rate would be applied in valuation? For instance, $100k NOI / 10% cap = $1M

If a mix of comp/income, what does that generally look like?

Thanks!

Most Popular Reply

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6,413
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3,685
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Bob Stevens
  • Real Estate Consultant
  • Cleveland
3,685
Votes |
6,413
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Bob Stevens
  • Real Estate Consultant
  • Cleveland
Replied
Quote from @William Barr:

How is a commercial lender going to determine the cap rate of a SFH section 8 portfolio? Say I built a portfolio of 10 SFH rentals, all rented via section 8. Say each house is bought individually for $75k (in a non-appreciating market) and portfolio NOI is $100k. If I took this portfolio to a commercial lender, assuming I've stabilized rents and all tenants are locked in a 12+ month lease, how would they value it?

Would it be based on comps - and therefore ~$750k?

If based on income, what cap rate would be applied in valuation? For instance, $100k NOI / 10% cap = $1M

If a mix of comp/income, what does that generally look like?

Thanks!


 Two-ways, income ration or value of property, 

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