Cap Rates During Downturns

[Shaun Armon]

Hey BP Community!

First post here on the forums.  I am a new investor in Fort Collins, CO looking for my first deal.  I am primarily interested in multifamily buy and hold.  I would like to keep my first deal local, but the cap rates here are a little scary at the moment (4-6%).  

Since I have yet to go through a down cycle as a real estate investor, I was wondering how high cap rates have historically gotten during previous down cycles?  I want to be able to accurately stress test my proforma's on potential deals.

Any thoughts are greatly appreciated.  Thanks!

Shaun

[Bill S.]

@Shaun Armon not really sure this answers your question for your area. About 15 years ago when I started in the business. People considered at 10 cap a quality property and the riskier areas had 12 and 14 cap (note interest rates were around 7% for an own occupied SFR. BTW we are in similar range of 4-6 for "quality" properties. If interest rates take a significant turn and you are not locked in that is where the scary part is.