What Is A Good Cap Rate? (Low? High? In the Middle?)

So you’re interested in buying commercial real estate but you want to know the difference between a low cap rate and a high cap rate investment? The amount of work going into each property can be drastically different. Let’s do a brief overview of triple net properties, how cap rates work on them, and then, I’ll dig into the advantages and disadvantages of high and low cap rates.

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Tyler is a Nashville native and the best-selling author of Open For Business: The Insider's Guide to Leasing Commercial Real Estate. He has experienced all sides of commercial real estate deals, including brokerage, management, investing, and development.

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The information provided in this video should not be construed or relied on as investment advice for any specific fact or circumstance. Its content was prepared by Tyler Cauble with its main office in Nashville, TN. This video is designed for entertainment and information purposes only. Viewing this video does not create a broker-client relationship with Tyler Cauble or any of its agents. You should not act or rely on any of the information contained herein without individual professional advice.

#commercialrealestate #realestateinvesting #cre #investing

[TylerCauble]

What do you think is a good cap rate and why?

[alexag]

Tyler! I am studying for my real estate exam in California and I couldn't for the life of me understand why higher cap rates are higher risk, and all the study materials weren't making sense. I get it now, after watching your video, thank you!

[sundayserjohn]

Most helpful cap rate explaination ever

[trev]

Great video. You explained this better than my professor in my graduate level real estate finance class.

[LaTerriusCampbell]

What if the property is a vacant multifamily, it has no income at the moment. How would you get a cap rate to value the property, would you create a pro forma for the expected NOI? Then how would you get the cap rate? Would you divide that by the purchase price and renovations combined?

[kadegentry]

Great video Tyler. With financing on these NNN properties, do you see seller carry typically on the higher or lower cap rate properties?

[vishy]

Hey Tyler,
I guess I see some things a bit differently here.
I heard you saying low CR properties are low NOI and high CR have high NOI.
My belief is low CR properties have their NOIs at almost-max levels with only periodic increases to push them upwards. While high-CR properties have a fair bit of room to grow in NOI terms due to increasing stabilization over time and the value adds.
Am I right in thinking this?
For me this cap rate subject is proving to be a bit tricky to get hold of and I'd appreciate your help in resolving this :)

[JudoChop]

Well Explained and enjoyed you flow.. Thank you

[serg_lupescu]

This is explained so well! Keep them coming.

[deborahd.]

Yes, 4 to 7% cap rates in niche like strip malls w/anchor tenant/s or medical ie: skilled nursing facilities, medical buildings for specialists are good & stable.

[RonaldSimonKahn]

Cap rate & Interest Rate?

Cap rate must be higher than interest rate!!!