All Forum Posts by: Chuck Kelley

@Chuck Kelley

How many years is a "few" years? Consider the IRR of your cash flow below based on various holding periods (you can do this in Excel):

3 yrs - IRR is 28%
5 yrs -   IRR is 17%
10 yrs - IRR is 9%

I'm comfortable with a 15% to 16% IRR (i.e. Required Rate of Return). So if a "few" years means 3 to 5 years, then I would be inclined to sell and redeploy the capital on preferably similar deal. If a "few" years means 10 years, this would be an investment that I shouldn't have made in the first place (i.e. the IRR is far below my RROR comfort level).

Note:

- Cap rate is irrelevant in this case, if this property is a true multifamily then cap rate can be used to estimate your exit price, but you already know it (i.e. 200k).

@Bjorik Mutize

@Bjorik Mutize

Did you mean to say "... you generally want to exit at a LOWER cap rate"? Cap rate and value are inversely related, the lower the exit cap the higher the sale price.

Cheers... Immanuel

Is this a property you need a cap rate to determine to sell? I mean i know you generally want to exit at a higher cap.

Otherwise, 100k increase in value is a pretty good indicator to sell if you want to exit! You have any debt on this property?