My real estate agent claims this has 5.9% cap rate - thoughts?

[Ian Goodstein]

Long time listener, first time caller. A real estate agent I have been working with in Los Angeles claims this property has a cap rate of 6%.

https://www.zillow.com/homedetails/6564-5th-Ave-Los-Angeles-CA-90043/20327737_zpid/

When I calculate it, I get a cap rate of 1.5%.

I am new to this and I'm curious what others get as the cap rate? I am trying to complete my first deal in the Los Angeles area, and I'm looking to learn all I can to avoid buying a bad deal. Thanks in advance for any replies. 

[Justin R.]

I don't understand why people say "you can't use a cap rate on SFD's." Sure you can, and it works great for comparing apples to apples. We all know that appraisals for 1-4 units are based upon comparables, not cap rate; but this doesn't mean it cannot be used as your personal underwriting tool.

It is simple to get two different cap rates....especially when one is prepared by a listing agent, wholesaler or the like. People encouraging a sale exaggerate the income, and minimize the expenses. This is done by no maintenance/Capex reserve, no vacancy reserve, not factoring in PM fees, etc.

The most important thing is to know how to analyze a property. There are many ways to do it, but make sure you are confident, and competent in the method you choose!!

Best of luck!