All Forum Posts by: Account Closed

NOI is only the net operating income potential. The less paid for it, resulting in a higher cap rate, measures the market perceived risk of the property being profitable.

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Originally posted by @Account Closed:

@Account Closed I would say you would need a good 15% cap rate to make it worth your while. Here in St. Louis I analyze areas where you can get a good 25%-40% cap rate. These are areas where a lot of out of state investors buy and hold.

What did mean with this: "If they said 9 what help could you give?"?

Can you show me your analysis on a 40% cap rate?

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Originally posted by @Account Closed:

@Hani Madbak have an area in mind? have a cap rate in mind? Need help analyzing numbers/area to look? Connect with me if you want that I will try and help you get into something.

What good is a cap rate for a residential property? If they said 9 what help could you give?

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Not until you educate yourself on the market and the correct way to value a property.

You would probably be best using sales comps and/or GRM's.

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Originally posted by @Matthew A.:

@Andrey

That's great, but appreciation still isn't a realized gain. Appreciation pays you nothing until you sell, or pull money out.

I'm not sure how that can be even argueed.

Don't confuse realized gains, with unrealized gains.

Matt

I'm with @Andrey Y on this. The problem with the cash flow only people is they think they have realized profit just because they have the cash on hand. They'll be surprised in 10 years when they have to bring cash to the table to get out of their losing investment.

Now with the appreciation AND cash flow (profit) investors may see appreciation hibernate. It doesn't go away. And like me you keep turning your increasing rents backed by appreciation into large chunks of cash. YOU CANNOT DO THAT WITH CASH FLOW AND NO APPRECIATION.

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Originally posted by @Tom Mole:

Hi @Account Closed,

What I was getting at here is if you're NOI is $3k/month and that represents 9% cap in a 9% market, then things are about where they should be and your purchase price is about $360k (in this example). However, if your NOI represents 3% cap in a 9% market, then you paid way too much and you may well be underwater, even if you could afford the cost of money. The risk is not covered by protective equity, so a lender would have to "just take your word for it" that you'd repay the loan. Scary!

I just don't have enough of @Andy Schwaderer's numbers to make an informed decision. My left pocket won't even lend to my right pocket without clear and complete numbers.

I hope this makes it a little clearer.

Cheers!!

In what market is someone paying $1,080,000 for a $360,000 property?

I got someone on another thread claiming he is buying $2,000,000 properties for $300,000!

Maybe there is a yuge misunderstanding of what market value is.

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Originally posted by @Tom Mole:

. In other words the $3k/month would not matter if you turn out to be making a 3% cap rate in a 9% cap market.

How would this be accomplished?

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Originally posted by @Brett Britten:

Originally posted by @Account Closed:

Originally posted by @Brett Britten:

How is it that a cap rate won't tell me when I should consider selling a property? If my cap rate is lower on one of my properties (around 8%), and my rents are close to market rates, that tells me I could sell the property and deploy the capital at another single family home where I could presumably achieve a higher cap rate. Seems pretty simple to me, Bob.

http://www.b2rfinance.com/blog/use-cap-rate-determ...

If you sell all your in demand NOI's (the lower cap rate properties) then you are left with NOI's that have less demand (the higher cap rate properties). How does that make sense? If you want HIGH cap rates, why would you, all you have o do is buy in low demand crappy areas.

You are chasing a number because you do not realize what it actually represents.

The higher the cap rate the LESS the market is willing to pay for the NOI. The market is perceiving that those properties will be more PROFITABLE. Profit is what you should be shopping for.

Your link has the guy saying, "The higher the cap rate, the better the annual rate of return." The only reason the cap rate is higher is because the purchase price is LOWER! Why would the market sell for LESS if the annual return is higher??? Think about that. See, it makes no sense whatsoever.

For one simple reason, which I have been trying to explain, and you apparently haven't been reading. Most single family homes are not purchased for passive income. Therefore, the value isn't determined by NOI. It is determined by the market value of the average home buyer, which is not an investor. For the umpteenth time.....that is why appraisals on single family homes NEVER use income approach to value. Again - Multi-family and commercial are vastly different that SFR.

Brett, you are the one that mentioned SFR cap rates in your first post and even went further to claim a SFR cap rate would signal a sell metric.

I have pointed out repeatedly that you don't understand cap rate as a real estate metric even for commercial properties

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That broad range pretty much tells you how useless your cap rate comps are. You are better off using Direct sales comparison or GRM's

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Cincinnati, Ohio

Originally posted by @John Thedford:

@Carson Wilcox

Let us know which episode to watch! I always want clues for better tenant screening:)

Whoa Barney Fife! This special edition of Cops is filmed on location with the men and women of law enforcement; all suspects are innocent until proven guilty in a court of law. LOL

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All Forum Posts by: Account Closed

Account Closed has started 8 posts and replied 3607 times.

Post: Clarification on Cap Rates

Post: new investor - Greenville, South Carolina area

Post: new investor - Greenville, South Carolina area

Post: Was This Correct Analysis

Post: What part of the country is there a better return then 6%

Post: 15 unit apartment renovation, financing options?

Post: 15 unit apartment renovation, financing options?

Post: Market Cap Rate

Post: Multi Fam Cap Rate Expectations

Post: Ca overpriced... why NOT buy several houses remotely?