Cap Rates In A NUT?
I have not been able to find the calculations for figuring out a cap rate.
The situation is this.......
The owner has 4-4 plexs. Free and clear.
They have a 97% occupancy and a waiting list to get into these units. All units have their own garage and pay electric and garbage and sewer and water. The building pays for water usage over 8000 galons in a month used by the www.building.The heat is done by Hot water.
These units are consistently full with only one vacant apartment lasting a month at worse case while cleaning for next tenant.
They rent for 420.00 a month as an average. 15 two bedrooms and 1 1 bedroom. The roof and boilers were all done 6 years ago and well maintained.
The asking is 500K for all of them. I dont know how to figure how good of deal this is and the agent didnt know. This is not on the listings but is thinking of doing so. He had 7 buildings and sold the 3 others at
150K, 165K, 175K.
Can someone help me on this????
What is the net operating income (NOI = gross income -vacancy - annual operating expenses)? Find out what the annual operating expenses are from the owner. Then divide the NOI by the sales price and that is the cap rate (Ex: $100,000 NOI/$1,000,000 asking price = 10% Cap Rate). [ Edited by JDC21 on Date 03/22/2005 ]
Thank you.
Now what is a good typical average to say if you were to hang on to this property for longterm and not flip?
I am thinking hold and keep the postive cash flow and equity to do another deal.
Secondly,
Do financing on units such as these since they are only 4 units per building and I have been told that these are residential NOT commercial really require a HIGH FICO or does the profit and loss statements carry enough weight to do it alone??
Looking at trying to get a lender to help with this and not knowing if they will require huge downpayments or will do a LTV with the income producing part and not so much look at FICO and more common sense approach to the policies?
Any advice and answers appreciated as this is a stepping stone to another deal which will relocate my family to another state and have a business to have besides real estate.
Please do not delete this is as I am not fishing or trying to get DIRECT leads only basic info to do the leg work myself.
Thanks
Surely you can find an appraiser??? There are lots of ways they can determine value....value of the existing structures combined with the value of the underlying land, value of use with cap rates and returns, etc. etc. If I recall you posted you had a small downtown district you owned. Surely they can look at the income approach or replacement value.
Charley,
I cannot imagine that your property is so unique tha it cannot be appraised, however if that truly is the case, then maybe your best best is to reduce its uniqueness by making it as similar as possible to an "appraisable" property. I assume since you are talking about bank financing you are dealing with a building. If its a building with historic value, then get the property historicaly landmarked, if it is "unique architecture" then bring in an architect to assit the appraiser. Worst case scenario, tear the building down, and finance the demolition cost in the new "appraisable" building. Hope my insight helps.