Cap rate usually fluctuates as follows:Lower cap rate = nicer areaHigher cap rate = crappier areaBut either way you want value add.But you shouldn’t be looking at this from a cap rate standpoint.

@Elisha KellerDebt coverage ratioThe debt coverage ratio allows you to see how many times the cash flow will cover the mortgage.This calculation is very important to understanding if the property can produce enough income to cover the debt.Remember that anything above the mortgage is profit.Typically a lender would want to see a debt coverage ratio of about 1.2 to 1.3.This calculation allows you to see if the property is healthy.Debt Coverage Ratio = NOI/Debt ServiceIn commercial >5 units we analyze and like to see a Cash on Cash Return 12%+, DCR 1.6%+ and a CAP 8%+ when those 3 are met there is enough return for you and the investor.Send me an email if you want to see a commercial deal analyzed I have a case study and supporting documents.Good luckPaul

Ash Patel Stuart Humphreys I have a multi family for $235k needs $300k in repairs values over $850k there's a lot of potential with a cap rate of 25+\-

Analyzing both operating and capital is key and determine if the unit has a rate at normal for market, higher or lower.Q2 - I would inquire about actual cost paid for the unit, how was it financied at time of purchase  and the financing terms(can be used to extract a Cap Rate).

A price per unit means nothing nor does a cap rate taken from BS numbers.

On an 8-12 unit building, I would still be expecting a CoC >=10 and a CAP >8.On a big building (50+ units) a CAP of 6.5 might be fine provided the CoC looks good.

They redid the drain tile, shored two walls and installed a sump pump on a cape cod I had in Bay View.

In my market there isn't a cap in the increases like I have seen some on BP post they have in their markets.  

I am an expert in Northeast Philadelphia where you can find cash flow properties with a cap rate between 1% to 1.5% on average. 

I have seen Dollar General leases where they have a cap on RTU costs or Kroger within a larger center, not paying their full prorata share for various items like roof replacement, or parking lot resealing).