Cap Rate???

[Hecmir]

I just want to make sure I’m understanding this correctly;

Let’s say I’m purchasing 2 Commercial properties with IDENTICAL properties with tenants & the same NOI

1st Property is going for $833,333 w/ a CR of 6%

Corporate owned by Taco Bell

2nd Property is going for $625,000 w/ a CR of 8%

Mom & pop Taco Shop

Is it safe to say that they are priced right???

I’m hearing cap rate when I look at Commercial Property but not fully clear on the right way to judge.

Thanks for any insight.

[Tom]

So those are good examples. The returns sound right too for average listings.

The Taco Bell is certainly a safer bet and thats why its a lower cap rate. The mom and pop is higher risk of failing so a higher return would be expected. If the mom and pop property was a Dominos they would likely want a 5-6 cap rate.

Good job digging in.

Tom

[Hecmir]

Ok great. It’s making sense now, I appreciate it. Thanks.

[Author]

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