Cap rates on commercial property

[Value Emperor]

Hi all

I've been doing a bit of research and pouring some money into commercial property. I only buy cheap , good occupancy and capitalisation rates of at least 8.5%.

Having limited experience (<10 years). I consider 8.5% Cap rate to be pretty good, with interest rates at less than that (even less if funded in the US).

I'm still concerned with capital protection, particularly in this climate. So I'm just wondering if anyone has ever seen cap rates much higher than around 9%.

Does anyone remember what cap rates were when interest rates were in the mid teens?

I figure 8.5% net yield on a fully occupied property to be much better than the gross 5% yield available on Resi property, hence my interest in commercial.

 

[Ridin-High]

Hi Value,

Firstly, i own no CIP. lol

Depends on your price bracket for that 8.5% and the percieved risk.

Do you think an investor will sell a property @ 10% or whatever nett yield if its any good? I think to get above the 9% nett yield one you get a distressed seller (other commitments) or two you manufacter that return by Reno/leasing.

Depends on the security offered for cost of funds as well, some of the majors for comm only security interest rates are in the 9's for variable, but if u plop a resi title in the mix that drops, if u lower ur lvr that drops, if you consider funding from a blended rate POV (eg. you using 30% resi equity @ 6.7% and 70% comm @ 9%) thats better. If you have cash even better.

I'll shoot u a PM tommorow Value.

Regards,

RH

 

[ugotadollar4me]

In most cases I will no touch anything under 10%, My average is 12%. Little harder to find but they are out there.

 

[Aaron Sice]

i've noticed a small trend, may be periodic, but it's there nonetheless.

the more expensive a property is, the better the yield. it may expensive because the yield is great - chicken, egg etc - but the better yields pop up when you move out of the mum'n'dad or 'nonno gino' arena.