I'm Making 22% CAP RATE !!!!! I AM A BETTER INVESTOR THAN Y'LL ! SUCK IT!
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[{"id": "hk8224c", "text": "Can we ban OP yet? Guy doesn\u2019t understand that there\u2019s more than one way to use the cap rate formula. For example, it can be used for quick comparisons between property that is for sale and comparable properties on the market and those that have sold.", "replies": [{"id": "hk82k68", "text": "Um,  what are you \"comparing\", asking prices?  Bwahahaha\n\nPS. Why not utilize the ignore poster function ?  Or show me where my posts are incorrect?", "replies": [{"id": "hk83hpn", "text": "We get it bud. You\u2019re talking about computing the value you should pay for a property based on market cap rates. \n\nHowever, there\u2019s another use of the cap rate formula. You are comparing the cap rate of the for-sale property to cap rates of properties on the market as well as cap rates of properties that have sold. You do this to make a convenient determination as to whether the seller\u2019s ask price is even in the ball park. \n\nMaybe it\u2019s because you\u2019ve never actually bought a property, but sellers don\u2019t just advertise their NOI and let you come up with the price. They have an ask price", "replies": [{"id": "hk88czi", "text": "We deal in multi-family, and it seems the majority of complexes we've looked at don't have asking prices. The market is a bit crazy (to say the least), so sellers are throwing their properties up and hoping some crazy bastard is going to overbid by a mile.\n\nThis is for 75-150 unit  complexes.\n\nThey give their T12s and it seems everyone is slapping down about 50% of gross income into a mortgage payment to get their price.", "replies": [{"id": "hk89zt2", "text": "&gt;We deal in multi-family, and it seems the majority of complexes we've looked at **don't have asking prices.**\n\nAnd there ya go.  But \"asking\" prices and \"asking\" cap rates are just that.  It is up to the buyer to have the skill to determine the probable market price.  u/SpongeyBoob  would not be a participant in this market I guess.", "replies": [], "depth": 5}], "depth": 4}, {"id": "hk88xi1", "text": "&gt;You are comparing the cap rate of the for-sale property to cap rates of properties on the market\n\nThose **\"cap rates\"** are just the sellers wished for dollar per NOI dollar that they want YOU to pay.  Good luck with that!  I gotta think you be screwed multiple times.\n\nSince properties will generally trade close to what other properties have sold for you could say all similar properties have the SAME cap rate.\n\nAt best you could compare cap rates from DIFFERENT markets for DIFFERENT asset class in the same market or other markets.\n\nScreening out properties just because the seller has a pricing issue is silly.  Now if you get to the point where you are actually making an offer then sure you could compare.  Hey, this and this property sold at a 10% cap and I think this property is inferior because of this, this and this so I will base my offer on a 10.2% cap rate.  See how easy that is?", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "hk89oct", "text": "Not OP, but I'm no fan of cap rates. It's too easy to manipulate either side of the equation. For sellers they can deliberately use a price below FMV knowing that buyers will bid above it, or they can fedangle the expenses a bit. Some creative accounting can allocate certain costs (like administrative) to other properties, and they can defer other expenses like maintenance or cap ex.  \n\n\nCap rate might be fine for internal comparisons, but I wouldn't trust any external cap rates without going line by line and figuring out how they got their numbers.\n\nAnd of course the ever brilliant \"pro forma\" cap numbers. They're just pure fantasy.", "replies": [{"id": "hk8b91t", "text": "I\u2019m not a fan of cap rates either. But when you\u2019re evaluating hundreds of deals per day, it gives you a quick gut check.", "replies": [{"id": "hk8cq79", "text": "I suppose as a general ball-park idea. Filter out the absolute crazies.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hk8312o", "text": "My favorite is when you see a cap rate for a vacant building based on pro forma", "replies": [{"id": "hk8fjvy", "text": "As long as they are asking at market cap rate why not?  If NOI is selling at 5% cap rate ($20) why would I sell for less?", "replies": [], "depth": 2}], "depth": 1}, {"id": "hk8gfjl", "text": "*Heeeeeeeeeeeeee's baaaaaaaaaaaaaack.*\n\nDude!!!! Do you have a cap rate fetish?\n\nDo you hang out in closests in your underwear waiting for someone to discuss cap rates?", "replies": [], "depth": 1}]