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Updated about 5 years ago on . Most recent reply
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Cap rate how important is it to you and how do you use it?
What cap rate do you look for when analysing a property? Do you stick by the same percent for each investment? Is there a "best" cap rate?
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- Real Estate Broker
- 3412 S. Harlem Avenue Riverside, IL 60546
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@Dimitry Peters I am less concerned about what the cap rate is when I buy the property, and more concerned with what the cap rate will be when I am operating the property. Typically, I buy things that are value add so the cap rates are very low (3, 4 or 5 even). Once I take over, I get them operating at a 10 cap or even higher.
In the Chicago burbs where I invest, it seems that the going cap rate for "stabilized" multifamily is anywhere from 4 cap in the A areas to 6-7 cap in the C areas. Even then, when you dig into the number a lot of the deals listed by local commercial brokers are actually probably negative cap rates.