Cap rates can vary by region. In NYC, the cap rate of 6.6% will apply to a property that is not in NYC. Real estate investors should remember that cities with higher populations tend to have lower cap rates. This means that they have lower capitalization rates.
It is quite easy to calculate this metric. Calculating the cap rate requires you to divide an asset’s net operating income by its purchase cost.
Although there may be regional variations, typically speaking, assets that have lower capitalization rates, such as 4-5%, would be class A or Class B assets.
Before you get into the discussion about what constitutes a good cap-rate, it is worth reviewing how to calculate this metric.
The bottom line: What is the best cap rate for multifamily properties? This question isn't answered by a single "good" cap rate. Many factors, including risk appetite and geographic location, play into whether or not a caprate rate is reasonable.
The capitalization ratio is an important part of the deal. Many real estate syndicators in multifamily realty would argue that the capitalization rates is as important than the net operating income. It's even more important than the purchase price. This metric helps you determine the property's value and whether it is worth investing in.
For investors, the question is: What is a good caprate for real estate properties? What is a good cap-rate for multi-family real estate properties? The following five facts will help you determine if your investment is worth it.