Property price $700k.NOI- 65k.Good deal or not?Cap rate is 9.28%.What min. C.R.can be accept?

In Buying Property - Asked by max b. - Feb 28, 2010
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Nick N.
Cincinnati, OH

It depends on the area, age and type of building etc. Please provide more info.

Feb 28, 2010
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Janine S.
Newport Beach, CA

A good deal is the perceived value in the buyers eyes. What was the property worth in the height of the market? Can improvements be made to the property to increase NOI?

Mar 2, 2010
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Gregory G.
San Francisco, CA

What product type and location?
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531

Mar 5, 2010
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John P.
Glen Burnie, MD

Deferring maintenance can make the N.O.I. look better than it really is and also make the Cap Rate appear in the desireable range. The offering Agent should have a full set of financials spanning several years and the rent rolls to show the vacancy rate, expiration dates, Lease payment currency. A site inspection adds to the decision to move forward. Hope this helps.

Mar 5, 2010
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Chris R.
Denton, TX

Way insufficient information for anyone to make an informed response. Type of property, age, condition, location, surrounding property uses, number of tenants and terms of leases, physical condidtion of the property and terms of leases as to who is responsible for what? Chris Rosprim, Scott Brown Commercial, Denton, TX

Mar 6, 2010
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Joel O.
Canton, GA

Remember your return regardless of cap rate will depend on debt service. You have to see if you have a class A,B,C building and if an A,B,C location.
The type of asset you are buying you need to check on saturation in the immediate area which will woo away your tenants. Many tenants are "TRADING UP" in this market to better locations for the same per SQ FT rates.This way when the economy returns they will have a sweet lease in place. You also need to check the leases and see how well protected you will be assuming the lease agreements.Check the area to make sure there are not big development projects going in or eminent domain issues that will affect the property you are looking at purchasing.
Yes when you can get all the records. My experience has been that large size buildings use property management or tax companies that keep excellent records. When you get into the smaller buildings many tenants are (MOM and POP) types who always keep bad records even though income is good. If your building has a national credit rated tenant in there that is usually better than the unstable mom and pop shop.
It's not just the price but many factors which is why you need a commercial broker to do the research for you to find the Diamond amongst the Coal. Remember it's your investment and money and you should make the best choice possible.
Joel Owens

Mar 7, 2010
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Stan D.
Hinsdale, IL

Don't forget about Capital Expenditures. It's not classified as an expense, but it is a negative cash flow item for you.
According to NAA (National Apatment Association) data, the average outlay is about 10% of the GROSS INCOME. If your NOI is $65k, your Gross Income is approximately $130k your capital expenditure are roughly $13k, and your cap rate drops to 7.4.
Stan D

Mar 14, 2010
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