So what is the cap rate on a property that has rent of $2385 per month and expenses of $350 per month

expenses include, taxes, insurance, water, minor maintenance
In Selling Property - Asked by Bob D. - Oct 29, 2012
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Answer(s)

David H.
Appraiser
Louisville, KY

Impossible to say without knowing what the sales price is. If you are asking what an appropriate rate for the implied cash flow is, one needs to know three things: quantity, quality, and durability. Of these, only quantity is known, and that only for the current year (month?). Rate selection depends on the terms of the lease, the nature of the lessee, and the quality of the underlying real estate.

Oct 29, 2012
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Bob D.
Owner/Investor
Anaheim, CA

279K asking price, 1 year leases, property was completely rehabbed in 2011 except the landscaping

Oct 29, 2012
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Rose & Terry P.
Broker/Agent
Canonsburg, PA

In the simplest of terms, cap rate is annual income less annual expenses divided by asking price. In this case the cap rate would be 8.75%.

Oct 30, 2012
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Rob B.
Chandler, AZ

Bob....
Your cap rate is 8.75%, based on a purchase price of $279,000.
Onward and Upward!
Rob Baird
rob@capratecommercial.com

Oct 30, 2012
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Rob B.
Chandler, AZ

Bob...
I wanted to add that if you want to improve your cap rate, you must purchase at less than $279,000. For example if you receive a discount of $10,000, with a price of $269,000, your cap rate will improve to a 9.08%.
For the SoCal area, this is likely a fine cap rate for the property your are considering. (Knowing nothing about the location or the market rental rates, but based simply on the fact that it is a lesser priced property, which often has lower cap rates if a residential income producing property).
Again.... Onward and Upward!
Rob Baird
rob@capratecommercial.com

Oct 30, 2012
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Monica M.
Owner/Investor
Valencia, CA

You are missing some numbers in your equation. What is the purchase price of the property? How many units are there? What is your down payment? How much is being financed and on what terms and on what interest rate?

Nov 1, 2012
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