Re: Capitalization Rate and IRR - Posted by Ed Garcia
Posted by Ed Garcia on February 02, 2000 at 11:01:04:
There are many ways to look at a deal. Some will look at the Cap rate, others will
look at the cash on cash return. When I look at a deal I need a minimum cap rate,
and then I take into consideration of the cap rates that are enjoyed in the area.
I also look for a deal that would have upside potential, something that would increase
the value of the property.
Also you look at the type of commercial property that you’ll be looking at, considering
the location. For example a mobile home park, would require a higher cap rate than
lets say a Walmart. If you decided to purchase a mobile home park and were looking
at several of them. Your cap rate would vary depending on the location, park rents,
competition, and condition of the park just to name some considerations when looking
at the value of a property. What could be considered a high cap rate in one area, may
be low in another. So I don’t think you’re going to get a crystal clear answer.