As an Instrustor in real estate for several years, I hear this question alot. Who would you lend money too?? Your bust out druken brother in law. Or the brother in law with 5 income properties, dresses well, is educated and has white teeth and runs an hour before work.? We know the answer sooo Cap rates change with diffenent properties, diffenent locations different income streams and different expences. Cap rates measure Risk.
A high cap rate would go to a tenament apt. that needs work and rents are paid daily. A low cap rate is a new glass tower that has AAA tenants. No risk lower rate but it will be around when the tenament is dust.
Rick Linhart CGA
Member of Unified Appraisers Guild
Sep 7, 2010