What affects CAP rate? (part I) - Invest on Main Street

This is Shuo here. 

The number one biggest factor affecting CAP rate is the location of the property. Big developed metropolitan cities have lower CAP rates than the emerging markets. 

Given the same, for example, NOI of 500k in LA with a 3% CAP rate, you need to finance 16.7M to purchase the property. 

If you’re in an emerging market trading at, for example, 6% CAP, you need half of the amount to own the same income producing level of an asset. 

We want to find properties in emerging markets that would put our investments best into use.

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Patrick Grimes

Patrick Grimes is a design engineer and CEO and Founder of Invest on Main Street, LLC. His real estate holdings include general partner ownership of a multifamily and single-family real estate portfolio valued over $146M, including 1,950+ units across the southeastern United States and Texas.

He has been active in real estate investment since 2007, including purchasing land and distressed assets, renovating them, and stabilizing them for long-term cash flow. ​To scale his real estate portfolio, Patrick moved from single-family to multifamily investing and founded Invest on Main Street, a private equity firm specializing in multifamily value-add projects in emerging markets.

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