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#21
09-26-2007, 06:24 PM
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Re: Private Mortgages
[ QUOTE ]
Well even 15% cap rate is just a number. There's more to it than the percentage. For example the tenant. If you have a very bad tenant that is often deliquant on their payments, it means you have 1 tenant occupying your entire commercial space and there's a high risk of the buyer buying the property and getting a property with huge costs and no paying tenants. It is different than residential where your risk is spread over multiple units. Another factor is the market. If you are thinking about investing in a market where the entire economy is collapsing, 15% cap rate SHOULD be the norm. Another factor of the market is WHERE your property is located. Even in the same city, if you own commercial property in the slums with poor people, you can expect to sell your property at higher cap rates than a few neighborhoods away. And I forgot to mention repairs. Repairs on commercial properties run really big numbers. [/ QUOTE ] Who said that it's a single tenant? It's a large office building with multiple leases. Repair/Vacancy/Collection Allowance should all be calculated into the cap rate if you are doing a good job. I agree that most advertised cap rates are pretty much useless. I agree with the local economy analysis. though. 
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#23
09-26-2007, 08:50 PM
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Re: Private Mortgages
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I wasn't talking about the property you were looking at. Just giving examples of factors that can influence the cap rates regardless of the NOI of the building. [/ QUOTE ] Correct...you can't just look at NOI, obv., but a properly calculated Cap should tell you everything you need to know about the property.
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#25
09-27-2007, 10:07 AM
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Re: Private Mortgages
[ QUOTE ]
1 million invest that appreciates to 7.5 million in 30 years is growing at an annual rate of 6.98& (spex x's first example) [/ QUOTE ] I think that the first example was 200k to 7.5 over thirty years.
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