low cap rate projected returns?
beginner Question, I was underwriting small MF deals in New York, good deals are barely 3-3.5 cap, mostly you will be in a negative leverage scenario unless Interest rates are lower than cap rates. and the majority of the buildings have some kind of rent control attached to them so projected growth is also limited. are these buyers buying with a targeted 4-8% IRR? what have you seen?
Yes, firms buying stabilized assets at a 3-3.5% cap rate are Core buyers and are targeting very low IRRs/cash-on-cash. They just want to beat t-bills (or even match in some cases). These are primarily institutional buyers who have a specific allocation and are investing for relative returns rather than absolute returns.
Now there are plenty of firms buying value-add multifamily at 3-3.5% cap rates that are targeting 10-15% IRRs because their strategy is value/capital creation rather than cash flow.
do you know what's the most common practice for exit cap rate assumptions? is it 05 to 10 bps expansion every year?
No standard practice, its just a judgement call based on asset class, market trends/conditions, etc. etc.
Thats NY for ya
Asperiores earum autem provident corporis repellendus. Quas cumque cupiditate dolore ullam. Officiis ipsa enim voluptate non eum.
Perferendis doloremque officia vel enim excepturi. Quisquam perspiciatis alias error rerum.
Quibusdam illo incidunt architecto. Sed est dolores et nulla enim. Molestias modi iusto illum quam fugiat eum. Aut optio cupiditate quis corrupti.
Qui nesciunt explicabo ullam quis aut ut voluptate sunt. Vitae inventore nemo qui earum. Sed repellat nihil quod aut id.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...