Desirable Cap Rate

[Jazmine Menders]

Hi!
I am a realtor that specializes in investment properties. 

One crucial metric in investing that I often utilize is the capitalization rate, or cap rate. It helps me explain to investors the potential return on investment for properties they may see potential in. My general rule of thumb is to invest in properties that have a minimum cap rate of 8%- 12%. Although I’ve seen investors  make deals on properties with a 6% cap rate.

I’m curious to know, what's your take on cap rates? How do you determine if a cap rate is attractive for an investment property?

Thanks!

[Zalman Ives]

Quote from @Jazmine Menders:

Hi!
I am a realtor that specializes in investment properties. 

One crucial metric in investing that I often utilize is the capitalization rate, or cap rate. It helps me explain to investors the potential return on investment for properties they may see potential in. My general rule of thumb is to invest in properties that have a minimum cap rate of 8%- 12%. Although I’ve seen investors  make deals on properties with a 6% cap rate.

I’m curious to know, what's your take on cap rates? How do you determine if a cap rate is attractive for an investment property?

Thanks!

Cap rate is the standard used for large multifamily - 5+ units. The way to determine what is a good cap rate is to see what other properties in the area sold for.

Essentially it is the same as running comps for a single family by price per sqft. You simply want to know what price you could potentially sell for so you don't overpay and end up with negative equity.

Cap rate works better with large multifamily for various reasons, but can technically be used for all property types if you like.