What Are Your Local Cap Rates?
Just curious, I don't see much value even in my "small" market. I've managed to find 12 properties in the last 18 months.... but this is first time I can ever remeber not seeing anything interesting on the market. I just closed on what is probably my "worst" deal, a 5yr old duplex in a nice area of town for $113k, rented for $575/600. Probably went low b/c one tenant moving out and terrable management. I would have never imagined having to "clean" up a 12.4% gross cap property (and is not close to my 7x annual income former requirement). I have some upside and awesome loan made it work out fine (credit union 3.75%/30yr ARM, 2yr adjustments max 1%). This makes my cap range 12.4-19.4% Gross.
Here are the ranges I see listed:
Low end appartments 7.2-8.8% Net
New or like new duplexes 9.7-10.6% gross
Do you mean You see gross income multipliers in the higer area? In my area, a GIM of 10 is pretty standard for properties that go "at market value." I had a duplex appraised at a 12 GIM (actually at the equivalent monthly multiplier, but who cares), I thought that was a bit too much.
Cap rates can go as low as 5-6% for little duplexes. Although, cap rates increase almost exponentially as you get into the more poorer neighborhoods and larger conversions. [ Edited by rmdane2000 on Date 07/03/2004 ]
6-8 is not uncommon for commercial, and no cashe flow (wait for promise of apprecialation on 2-4 units)
New or like new ~10% gross, older stuff that attracts lower quality tenants ~14% gross. "Low end appartments" listed number was net, usually high expenses, management, high vacancies in that number.
I find this discussion interesting. I have a duplex that I am in the process of selling. Each side rents for $750 dollars for a total of $1500 dollars. It is in great shape, but I have been having an increasingly difficult time finding tenants willing to pay $750 per side. I have an offer of $210,000.
According to the discussion above, it looks like this should be a no brainer.
Comments?
Quote:
On 2004-07-11 22:34, curtbixel wrote:
I find this discussion interesting. I have a duplex that I am in the process of selling. Each side rents for $750 dollars for a total of $1500 dollars. It is in great shape, but I have been having an increasingly difficult time finding tenants willing to pay $750 per side. I have an offer of $210,000.
According to the discussion above, it looks like this should be a no brainer.
Comments?
I guess it depends on the market.... $210k would be way overpriced in my market. (A typical investor, who uses an LLC and commercial financing, may get a 80%LTV loan, payback rate based at 6% for 15yr (loan at floating rate at prime +0-1), so if they put $42k cash into your duplex, payment may by ~$1417, so negative after taxes/insurance/vacancy/expenses, even only borrowing $168k) More investors are starting to get residentual finanincing to make these deals happening, with long term financing. Histrorically, I could always find new or like new duplexes for 100x monthly income, older duplexes or cheap SFHs for 84x monthly income, other between these figures. That is why I was curious what other markets were seeing. An example of what I'm seeing locally, new consturction (<1yr old) 3BR Duplexes "nice", fully rented for $675 per side (could move to $725 current market in neighboorhood), $150k.... these are what I consider the most "overpriced" units currently listed (have been sitting in MLS for at least 6 months now). In the same city market this year I bought some older duplexs for $71k each rented $450 at time (Bought in January, 1986/1987 built, but vinyl and replacement windows recently, rent moved to $495/$520). Two weeks ago, like new duplex $113k, $575/600 rent (built in 1999, trying to move rents to ~$630-650).
Here in SoCal escalated prices have made it difficult to find deals that work. Given current values cap rates are around 4% maybe owner. For some units you have to go in very deep to make it work, in other words 50% down payments.
Funny, here on Miami beach properties are priced completely on the conversion value. If you see any sort of yield it's negative. ( I figured to quote yield vrs. cap rate )
but anyway this is an interesting topic. Now if your looking at NYC, there you get some nice buildings with good and decent Cap rates ( 6 to 8 )
Interesting discussion. Here in central Ohio there is the opportunity to buy at cap rates of 8 to 9 in nice neighborhoods. Bad neighborhoods will give 10+ caps, as will some rural areas. This gives cash-on-cash of 12 to 18 percent. Seems pretty good till you see that appreciation is about nil for such properties. You need to pick your strategy, I guess.
Dear Max,
I also live in Columbus, Ohio. You mentioned some properties in nice neigborhoods with Cap rates of 8 - 9%. Where are these properties? I currently own two duplexes in Clintonville. The appreciation has been great, but I think the appreciation may slow down a great deal in the near term. The cap rates on these properties is about 5%.
I am interested in hearing more about your take on the current market in Columbus. I have quit buying and am even in the process of selling one of my properties.