Is an 8% cap rate achievable?

[ryanlake]

I have an investor looking for a multi unit building with a purchase price of 500k or more with a minimum cap rate of 8%



Any potential properties worth looking at around Edmonton?

 

[ChrisDavies]

There's too many places to hide, pad or lie when coming up with cap rates. Can we make it do 8% on paper, sure. In reality, no. Max in reality right now is probably 6.5-7% for Edmonton and with a purchase price of only $500k you're not really buying multi-family, just a suited house. I have heard of deals on industrial or some commercial properties in Alberta which do higher rates or if you go to smaller centers you'll get up to the 8-9% cap range. That said there's some decent quality 6-8 unit properties around including some of my listings which are in the $500-700k range.



Remember, cap rates are independent on things like tenant quality, deferred maintenance and headache factor.

 

[Thomas Beyer]

No. Only in small towns with poor economics, far from major centers. Not with interest rates sub 3%. Educate him on the real world.

 

[ryanlake]

Why smaller communities? Is it because of a lower purchase price?

 

[Thomas Beyer]

Smaller community = less diverse industry = more risk = higher CAP rate.

 

[GordIng]

Yes exceeding an 8% cap rate is achievable. I just finished closing on a deal in southern Saskatchewan and yes it is in a smaller community however the demand for housing is strong and rental rates reflect that.If you have the time research Saskatchewan.