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Cap Rates

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  • Cap Rates

    We have a refinancing coming up and I am checking on cap rates being used by appraisers. Mortgage Bankers are telling me they are about 6.5% to 7.0%. Anybody hear anything different? Thanks.

  • #2
    Cap rates will vary depending on how attractive your property is to large buyers. If you have a large class A property in a major market, the cap rate would be lower than a basic site in a small market.

    So without knowing more about the property it would be hard to say if it's good or bad. About a year ago mine (small market site, new construction) was appraised with an 8% cap rate. So to me your rate sounds good. But I have no idea if its an apples to apples comparison, and rates have been low lately due to the amount of money chasing these properties.

    A have seen two different appraisers more than $50k apart on a property. Numbers can vary very widely from one to another, especially if one of them does not have experience in the industry.

    Steve

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    • #3
      Steve is right. They can be anywhere from 5% to 8%. We had a rough warehouse in Toronto at a 5.5% cap. I think 6%-6.5% is decent.

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      • #4
        Echo the above 2. We have seen everything from a 5.25 to 10+ depending on market, physical quality and how well the facility is run.
        Chasing Perfection to catch Excellence

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        • #5
          Appraiser's accuracy makes Weathermen look perfect. It's a guess and there is no accountability in the system. But it's required so everyone uses them. Unfortunately, your livelihood and financial future can depend on their guessing. Good luck.

          I am seeing 8-9% in actual purchases in upper Midwest.

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          • #6
            If interest stays low 4.5% to 5.0% a lower cap rate ( 7%) might work, but if they go up to 6% or 7% go with (9% or 10%)
            Dave (Woodee) Scott

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