Cash Flow Friday Tip #19: Why CAP rate isn't king and can sometimes be misleading
Real Estate Investing for Cash Flow with Kevin Bupp
Kevin Bupp
4.8 • 679 Ratings
🗓️ 22 May 2015
⏱️ 17 minutes
🧾️ Download transcript
Summary
In this week's Cash Flow Friday tip we're going to talk CAP rates and why you as an investor need not to get too hung up on this arbitrary number when looking at deals...especially value-add deals. This topic comes as a direct result of a deal our company has been pursuing now for the past few weeks and just got an accepted offer on. I'm going to provide the background of the story regarding this specific deal so you can fully understand why if you were only searching for deals based on a specific cap rate you probably would have passed on this property and you wouldn't be alone because I'm sure there are many others who passed on this deal I'm about to tell you about in today's show.
Also, I wanted to give a shout out again to Marco Santarelli from Norada Real Estate Investments for his contribution to the topic we covered in last week's cash flow Friday tip #18. If you haven't had the chance to listen to it I suggest you go and check it out, and if you're not familiar with Marco's blog be sure to go and have a look because it's chalk full of incredible information regarding real estate investing and you can check it out by going to Norada Real Estate
Recommended Resources:
- Download my free success guide, “7 habits of highly successful multi-family investors” by going to www.KevinBupp.com/guide
- Schedule your free 30 minute "no obligation" call directly with Kevin by clicking this link https://www.timetrade.com/book/KV2D2
- Looking to invest in Mobile Home Parks? Want to JV with me on deals? If so, schedule a call with me and let’s talk. Click here https://www.timetrade.com/book/FGF7S
Transcript
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| 0:00.0 | Welcome to Kevin's Cashflow Friday Real Estate Tip, where Kevin shares with you strategies |
| 0:09.8 | and tips that will help increase your cash flow, make you a more sophisticated investor, |
| 0:14.8 | and provide you with the tools necessary to take your real estate business to the next level. |
| 0:19.4 | Now, here's the man you've been waiting for, Kevin Bub. |
| 0:23.3 | Hey guys, Kevin Bup here with episode number 19 on the Real Estate Investing for Cashflow, |
| 0:28.8 | Cashflow Friday Tip. |
| 0:30.4 | Thank you for joining me today as I share tips and strategies that will hopefully bring you |
| 0:33.9 | a ton of value and help take your real estate business to the next level. |
| 0:37.7 | And in this week's Cashwell Friday tip, we're going to talk about cap rates and why you as an |
| 0:42.2 | investor need not to get too hung up on this arbitrary number when looking at deals, especially |
| 0:47.6 | value-added deals, which is kind of the word of the week or the word of the year value at. |
| 0:53.1 | I feel like every broker that pitches a product now, whether it's an A class or a C class property, |
| 0:58.2 | it's still a value add property. |
| 1:00.0 | But either way, this topic comes, you know, this topic of cap rate comes from a direct |
| 1:06.3 | result of a deal that our company has been pursuing now for the past few weeks, and we just got an |
| 1:12.8 | accepted offer on it as of yesterday. In fact, we're going into contract here as we speak. |
| 1:17.1 | So I'm going to provide the background of the story regarding this specific deal so that you |
| 1:22.2 | can fully understand why if you were only searching for deals based on a specific cap rate, |
| 1:27.2 | which I know what a lot of |
| 1:28.3 | people do, a lot of new people do, they only look for cap rates. You would probably would have |
| 1:32.3 | passed on this property and you wouldn't have been alone because I'm sure there were many others, |
| 1:37.7 | maybe hundreds, who passed on this particular deal that I'm about to tell you about. |
... |
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