Cap Rate on 28 units (no room for debt service). Who buys these things?

[Ethan Bowen]

So I saw a deal (if you'd call it that). There is a group of older investors ready to retire wanting to sell 7 buildings (4-plexes) on one bock for 2mil. The numbers given to me had a 5.8% NOI. Looking closer, they weren't factoring debt service at all into the expenses. So really the only person going to buy this is someone with pure liquid capitol that would have no debt service.

My question: Is their really a market for things like this? Are their people out their that invest 2mil of their own money into something like this with a 5.8% NOI? Or is this just a pipe dream for the sellers?

Thanks!

[Karl Pierre]

As noted above debt service is never included in NOI calculations and assessed from a return on cash perspective. With that said people would definitely buy this asset if a solid management team is in place and they are looking to capture a higher yield on their capital so that they aren't losing money to inflation or what they would yield on US treasury bonds and other low yielding securities.

@Ethan Bowen this may not meet your investment criteria but lets assume the buyer has 10M in cash that they wanted to park in what many perceive to be a stable and relatively liquid asset.  At 5% the investor would earn 500k annually for doing what exactly, parking money in a functioning money machine.

This is not criticism by the way, it's offering a different perspective/approach to REI.