Cap rate question

[Fernando]

Why not? Choose one or the other - then make a simple cogent argument WHY YOU CHOSE THAT rate. Was it because the most similar income comp property had that rate? Were they all equally bad or good, and you averaged? Or were 2 more similar and you blended that rate. Or was it your choice to use the rate from a survey source because it is a typical market rate and your comps were not typical? No one can prove you wrong. Again, make the case for why you chose that particular rate and stick to it.

I have used Realty Rates before and simply declare that they are a regional survey and my subject seemed similar and typical to the same- particularly true of RV and MH Parks - as well as self-storage. I have calculated those and found they were pretty much what the survey said.
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Looking at past 10 years, cap rates seem to be relatively same.
As an investor, I would want a higher cap rates in current high T bill environment especially with higher risks in commercials.
Am I missing something?

 

[Terrel L. Shields]

As an investor, I would want a higher cap rates in current high T bill environment especially with higher risks in commercials.

Not if I am reading you right. You want to pay less when the risk is more.

 

[Fernando]

Not if I am reading you right. You want to pay less when the risk is more.

Yes, I want lower price to buy for higher risk.

 

[Ricky LaFleur]

I asked the question whether or not cap rates are sometimes taken from published sources. The response was a resounding no.

There are some issues with published sources, but they are helpful additional support. Realty Rates pulls some info from bankers and appraisers, which IMO can at times be marginally more reliable than a realtor's description of a house with "good bones" . The other trick, for me, is that they are often taken in areas that are less similar than mine and for maybe Class A properties where I may be looking at a lower cost Class C or D (looking at you, pole barn office on the edge of town!). The guy at Realty Rates, who I assumed was the owner, is really nice and will gladly explain some of the nuance of the rates given and what weakness they may have.

 

[Zephyr999]

There are some issues with published sources, but they are helpful additional support. Realty Rates pulls some info from bankers and appraisers, which IMO can at times be marginally more reliable than a realtor's description of a house with "good bones" . The other trick, for me, is that they are often taken in areas that are less similar than mine and for maybe Class A properties where I may be looking at a lower cost Class C or D (looking at you, pole barn office on the edge of town!). The guy at Realty Rates, who I assumed was the owner, is really nice and will gladly explain some of the nuance of the rates given and what weakness they may have.

There are data sources that provide Tier 1, 2, and 3 market details that can also be persuasive in final conclusions.