CAP Rate vs Interest Rate

[Pratap Koppula]

Looking for a small multi-Unit in California, realized, at times, the Capitalization rate is less than the interest rate (Negative return). Considering the cost of selling expenses, this is really risky in a short term and difficult to survive with low spread on long term.

At the same time, we will not be able to run a financial simulation on every listing and realized the usefulness of “Spread”, the difference between Cap rate and Interest rate. The more is the spread, the better is the margin to protect in this pandemic.

Now looking Vegas and Atlanta as alternatives. However, what is the strategy that works with this low ‘spread’ markets?