Cap Rates In Miami?
I live in Miami Dade, Fl and I was wondering what kind of Cap rates are being used in this area? I hear many people saying 10% is the norm. Would that number apply to Miami's rapidly appreciating re market? Just wanted to get an idea of what other investors in Miami Dade might be using.
And also, is it practical and useful to incorporate cap rate calculations for SFH's and Duplexes?
thanks ,
jose
:-?
Hello from Naples, another fast appreciating area.
Like me, you may have to look a little outside the real quickly appreciating areas if you are looking for cashflow.
If you plan on holding long term, then I would not do something that didn't have at least a 10 cap rate.
You can use cap rates on SFH and mutli-family units as well.
GL
Thank you very much, you answered both of my questions regarding cap rates. I just wasn't sure if I was wasting my time basing my offers on cap rates for SFH's and duplexes.
Thanks again!
Good luck, if you haven't already read it, I recomend Robert Allen's "No money down for the 90's" book. It has a lot of calculations in it to help.
Let's pray Ivan goes away!
Ray Higdon
So, just to clarify:
I am currently looking at this duplex that is being sold for $300k, and the NOI is around $15k, assuming a cap rate of 10%. In order to find out what my offer would have to be to justify a 10% cap rate, I would have to make the following calculations:
NOI(15K) / R(10%) = $150,000 (OFFER?)
Is this accurate? If so, seems like this guy is either asking too much or I may have to bring down my cap rate? What do you think? Am I on the right track here or do I have to use another method to calculate to offer price?
thanks!
If that is the true NOI, then yes, your looking at a property with a very low cap rate...what are the gross rents on it? What expenses would you have to pay? Small income properties, generally speaking, have very low cap rates. There are many many investors for these properties. A guy from California just made an offer on an 8 or 10 plex in my area with an implied 4.5% cap rate....absolutely crazy...of course, he is know trying to back out of the deal or reduce the purchase price, but people get kinda crazy for small investment properties.
I wouldn't do that deal and it doesn't suprise me at all in Miami. I do the quick 1% gross monthly calc to start off and I shoot for $150 per unit cashflow.
A recent deal was for 3 SFH's. Got them to $140,000 for all 3, the NOI is $16,872 for a cap rate of 12.05. This was a pretty good deal, you have to keep hunting. Negative cashflow is not an option to me, don't know about you.
GL
[addsig]
I ran the numbers several times and even hypothetically raised the rents hundreds of dollars to see the results and even like thatt, the deal still didn't seem to produce a positive cashflow.
I don't know if it is realistic for me to try to shoot for a 10% cap rate in my area. Should I lower my expectations to maybe 7% or 7.5%? I do realize that property prices are appreciating rapidly here and maybe I should take that into consideration.
I am growing so impatient to purchase my first investment property but I also don't want to make a mistake right off the bat on my first deal so I want to be very careful.
It depends on what your goals are. Mine is to get my cashflow up to a certain dollar amount and then start REI fulltime. Yuor goals may be different. I do not calculate appreciation at all, if my properties appreciate that's gravy, not calculated.
High appreciating areas can be good places to do flips. Again, you may have to look a little outside your area to find the good cashflow deals.
GL
Ray Higdon
Ray, What is the market like in naples? How far outside of your area to you have to go to find investments? You do you invest in Ft. Myers? Any advice for a newbie heading to the Ft. Myers area?