A: A cap rate is not a measure of return.

I don't see this mentioned more often but look at property tax rates, how often property values are reassessed, and if there's a cap with each increase.

Just curious.ThanksRogerIt really depends on what I have to go off of.If the listing broker advertises a cap rate with no additional information, I go with that.

You also have the ability to go through an LLC if that is the route you want to take and do not have a cap on size/concentration limits.

If the cap rate goes up because the market changes, like from 0.05 (5%) to 0.06 (6%), even if you're still making $100,000, your property's value changes.So with a cap rate of 6%, it looks like this:Value of Property = $100,000 / 0.06 = $1,666,666.67Even though you're making the same amount of money, your asset's value went down because the cap rate went up.

With current rents and purchase price, it has a cap rate of 8%.

We were also thinking of trying to put a cap for the smaller units since their rate goes up as the $ amount and sqft goes down.

If the project only cashflows with interest only payments, that isn't a deal to me. there are going to be other costs involved such a cap ex and maintenance, so you will need to bake in a certain amount of expenses beyond jsut the mortgage payment too.

Anything with a cap is an inferior service.   

I do recommend a cap and you can also have thermostats with upper and lower limits so one person can't set it to 80,  put those limits in the lease.