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Curious what others are seeing out there, as well as what you would deem acceptable for the inherent risk. I'm seeing a lot at 5%, which I don't think is good enough.
What are you using to determine cap rates? And no, 5% isn't good enough.
Ditto, I'm seeing 5% (on net) which isn't good enough.
ah, factoring all closing costs plus estimated repairs (if needed), utilities, taxes, insurance, and 11 months' rent roll. In general, I'm seeing slightly higher rates (6-7%) if there's a commercial space on the ground floor, but I know those are trickier to rent out.
10023, which neighborhoods have you looked in?
That's a good start. You also need projected short-, medium- and long-term repair/replacement projections (in today's dollars), even if the place doesn't appear to require repairs now. Structures are deteriorating life-forms. You also probably need some ongoing labor, unless you seriously expect to do all the snow-shoveling and the trash-bag routine and sidewalk and hallway cleaning. A little legal, a little accounting. Like that.
http://visulate.net/investment
Right, thanks alan. I do have a very general maintenance and management item in my calcs, but this is a bit more detailed, which is especially helpful to get to a more accurate number.
people want 5%. I can't see how it makes sense at those levels. You can by a shopping center in NJ at a 9% cap.
When the bubble was fully inflated, of course, people were happy with negative cap rates (or maybe there's a divide-by-zero "meaningless in the set of real numbers" impossibility to that; I don't believe in mathematics so I couldn't tell you). So at 5% you're getting a MUCH better deal than only a few years ago. Sold!
The market value of the apt buildings are higher because of growth potential. The shopping center in NJ is not going to have much different numbers in a few years....
Growth potential? Asking prices in Bed-Stuy inching towards $1.5m. That's way past growth. That's elephantiasis.
I was talking general terms of resi vs commercial cap rates
MAV - Why would NY residential have greater growth potential than NJ retail or commercial?
Reits and utilities giving off 13%..... So so myopic. Get bigger thicker coke bootle glasses.
w67th, agreed, but this is for a 1031 exchange. Otherwise, it's all Sprint all the time!
What are you 1031 exchanging?
5% was the accepted norm in 2007. The expectation of rising equity in price valuations drove the market.
There are to many pitfalls to accumulate at a 5% Capitalization Rate. Look for a higher rate. Positive Cash Flow with larger Cap. rates are out there. Try finding an Internal Rate of Return on your Cash Flow. Good luck on your investment and your return and what you do with that return.
Rental property in DC.
BJW you can find a 5% cap in Manhattan, if you spend $5mm and up
Already finding better than 5 (though not much) in Brooklyn without having to throw $5m at an illiquid asset. As stated above, 5 ain't good enough.