Good evening everybody. I was just checking some proforma on apartment buildings in different cities in Canada and I noticed some proforma have two CAP rates, one is called CAP rate and the second is called financing CAP rate.
Example: Price: 850,000
Revenues: 64,440
Expenses: 27,166
DCR CMHC: 1.3
Amortization: 30 years
Interest rate CMHC: 3.5
Down payment CMHC: 317,000
Cash on cash: 2.3%
Cash on cash + principal: 5.7%
IRR with 2% appreciation: 11%
CAP rate: 4.4%
Financing CAP rate: 5.94%
For me this doesn't sound like a good investment but I'm just curious what's the difference between the two CAP rates is and which one should one normally go with to decide? What grabbed my attention is the difference is big.
Vancouver and Toronto are overvalued so I forgot about them. In Calgary and Edmonton in particular where I'm interested right now there's nothing available. So I thought I would check Montreal out of curiosity to see what the numbers look like where the above example is from but I realized the prices compared to rents are overvalued as well.
Example: Price: 850,000
Revenues: 64,440
Expenses: 27,166
DCR CMHC: 1.3
Amortization: 30 years
Interest rate CMHC: 3.5
Down payment CMHC: 317,000
Cash on cash: 2.3%
Cash on cash + principal: 5.7%
IRR with 2% appreciation: 11%
CAP rate: 4.4%
Financing CAP rate: 5.94%
For me this doesn't sound like a good investment but I'm just curious what's the difference between the two CAP rates is and which one should one normally go with to decide? What grabbed my attention is the difference is big.
Vancouver and Toronto are overvalued so I forgot about them. In Calgary and Edmonton in particular where I'm interested right now there's nothing available. So I thought I would check Montreal out of curiosity to see what the numbers look like where the above example is from but I realized the prices compared to rents are overvalued as well.