Could be this a good deal in today market? Multifamily S. Florida- price $6.5M with 6.35% cap and has 1.22% of

In Buying Property - Asked by EVA H. - Dec 15, 2008
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Answer(s)

Eric W.
Broker/Agent
Carlsbad, CA

I don't see what the last part of your questions is, but generally I wouldn't pay less than a 7.5% cap unless there was strong upside in rents and the property was infill with no capital improvements needed in the first year. The debt markets are driving cap rates up now as yields are going down dramatically with lower LTV and higher interest rates.
Eric Webb
EricWebb@sovcapital.com

Dec 15, 2008
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Joe V.
Owner/Investor
Plymouth, MI

Figure that the driving force in an acceptable CAP reate is going to be the interest rate you can get on your debt service, and the LTV you can get for financing. The higher the interest rate, the higher the CAP needs to be to make it cash flow. Likewise, the higher the LTV the higher the payment will be, but the less out of pocket or alternative financing (Hard Money, cash in or seller carry back) needed. What ever the monthly payment is (ideally at 100% financing) will be, you need a high enough CAP rate to compensate. The driving forsce for your desired CAP is going to be the debt service.

Dec 18, 2008
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Chris S.
Broker/Agent
Coeur D'alene, ID

Don't focus only on the cap rate, your internal rate of return is much more important and a much better and more accurate determinant of value. So many "investors" have focused on cap rate and lost sight of the fact that what they really are looking for is a rate of return. Compare the rate of return on this potential deal to the rate you can get from other investments.
That being said I agree that I would not even consider property under a 7% maybe 8% cap depending on the market.
Think of a cap rate like curb appeal on a home, it's just a place to start!

Jan 5, 2009
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