Cap rates are going to differ from market to market and property type to property type. Multi family in Chicago may be at an 8 cap while multi family in Detroit may be at a 10 cap. You can get national average cap rate info from the large associations such as national apartment association.
The best way to get local is to call Realtors (not that great though), commercial bankers, local development authorities, appraisers. The best advice I can give is aim for a 12 cap and the lower your cap gets the less money you’re making. Good luck.
Loopnet is a good website for looking for REI deals and you can search by cap rate as well. Like previously mentioned, the higher the CAP Rate the better the cashflow. I look for a 12+ cap rate. Some deals can be found as high as 20 but rare. Anything under a 10 generally will not have a strong cashflow and leave no room for extra expenses.
Cap rate is calculated by NOI/Sale Price but it is also just a generalized number to see if the deal can work
Ex. 100K rental income. Property cost 875K
100,000/875,000 = 11.4% CAP RATE
100,000/1,500,000 = 6.6% CAP RATE
Thanks a lot for all the info. I understand that cap rates vary by property type and location. I was hoping to find local (by type) cap rates online. I am a newbee and wanted something to cross reference since I don’t know who would be the best source for this information.
I am looking to purchase 5-20 unit multi-family properties. Focusing on blue collar neighborhoods. To say, no slums but no “luxury” apartments either. There are a couple of small towns/cities close to where I’ll live that seem to have good opportunities; neighborhood wise- good (i.e. quiet, low crime, working class) and some growth potential. I just want to decifer which is the best to start.
Michigan , Indiana. a lot of the south. Ohio , Nebraska.
Places you would never find high cap rates (10%+) are Beverly Hills , La Jolla , Newport Beach , San Francisco in Cali. Palm Beach , Manhatan , bloomfield hills , the hamptons , Park ave.
Get the hint. The higher cost area’s the lower the cap rates will be. The lower cost area’s the higher the cap rates will be.
I would think a place like Detroit would have some pretty high caps right now. I have read where in that part of Michigan nobody whants the foreclosures not even the banks. The city just bulldozes whole tracks and leaves area’s empty.