Multi-Unit Property anywhere in US
Hello. I am looking to buy a multi-unit property anywhere in US around $700K.
What kind of GRM/ CAP rate can I expect in different parts of the country.
I am looking for a building in decent neigborhood, plenty of renters and good condition.
Thanks in advance,
Alexander.
Quote:
On 2003-03-20 00:32, agabovich wrote:
Hello. I am looking to buy a multi-unit property anywhere in US around $700K.
What kind of GRM/ CAP rate can I expect in different parts of the country.
I am looking for a building in decent neigborhood, plenty of renters and good condition.Alexander,
Let's see, my crystal ball says GRM between 5.8 and 21.3 and a CAP rate between 6.2 and 15.1.
Seriously, what GRM and/or CAP rate do you want? If you want a 6.0 GRM )or better) for a property with $10K in gross monthly rents, then don't pay more that $720K for the property. For that same property, if you want a CAP rate of 10 and the net operating income is $6K per month, then don't pay more than $720K for the property.
When purchasing a property with tenants, you might use GRM and CAP rate as guides in determining the maximum value of the property. Once you have established its value to you, you know when a property is overpriced.
Thanks for the reply.
I guess I did not explain myself clearly.
I am looking to buy a multi-unit property.
I am trying to evaluate different areas of country to find best areas for investment opportunities. Basically I am looking for areas that have plenty of renters with properties having low GRM.
I am just soliciting thoughts on the areas of the country that would fir the criteria.
Alexander.
I'm a novice investor and have typically used simple math to calculate expenses, rents etc. to determine whether or not a deal made sense. I must plead ignorant on what a GRM is and how to calculate it. Understanding the GRM and Cap rate ratios would really help me evaluate a deal much quicker. Does anyone have a doc. or can briefly describe these to me. The help is greatly appreciated.
[addsig]
Quote:
On 2003-03-20 02:09, agabovich wrote:
I am just soliciting thoughts on the areas of the country that would fir the criteria.
Alexander.
To risley:
GRM = Price/Yearly Gross Scheduled Income
(Personally I like to use monthly gross scheduled income, simply because I can calculate it more quickly, but most use yearly.)
Cap rate = NOI/Price
(You may want to use a standard calculation for NOI to compare different properties. Obviously the same property could be poorly managed or very efficiently managed which will give very different NOI's, and therefore Cap rates. I generally use an expense factor of 25% (ie NOI = GSI X .75).
I might be able to help you out depending on what you are trying to do and what your needs are. Send me a private message and we'll chat.
I might add that cap's will vary greatly within the same area based on the age/condition of the property and within the same city based on the area.
With that, I'll say that the average Cap for multi unit properties sold in Utah in the last 12 months (based on 25% expense factor) is 9.96. It seems to range from 7 to 13.5.
Quote:
On 2003-03-20 02:09, agabovich wrote:
Thanks for the reply.
I guess I did not explain myself clearly.
I am looking to buy a multi-unit property.
I am trying to evaluate different areas of country to find best areas for investment opportunities. Basically I am looking for areas that have plenty of renters with properties having low GRM.
I am just soliciting thoughts on the areas of the country that would fir the criteria.
Alexander.
If you look at it from an economic basis, and your free to go anywhere, I would suggest looking where the Big companies are relocating their facilities to, and then look for the surrounding towns that have the lowest vacancy rates. I found some interesting info on this type of information at ****Must Reach Freshman Investor status before posting URL's*** . You might want to read the Fifth Migration. I believe it could give you some in sight on which to base your searching. I hope this helps. NAREI.com