Here’s Why Cap Rate Should Not Be a Priority When Considering Passive Investments...

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Have you ever come across the term "cap rate"?

Are you exclusively fixated on cap rate as your compass when venturing into the realm of passive investments in multi-family real estate?

Well, let me share some insight on why this fixation might not be the wisest move, and why there's more to consider.

You see, in the world of multi-family real estate, most folks utilize debt as a means to facilitate transactions, which is where the concept of capitalization rate comes into play.

Now, let's talk about why cap rate shouldn't be your top priority. It's essentially a tool to help you determine the sales price down the line. However, focusing solely on cap rate can lead you astray.

So, what should genuinely hold your attention?
• Your equity multiple – this tells you how much you'll multiply your initial investment.
• IRR (Internal Rate of Return) – a critical metric to gauge the overall profitability.
• Tax advantages – don't overlook the potential benefits on this front.
• The multiplier for cap rate – this merely indicates the property's current performance, not your potential earnings.

Now, the big question: cap rate or cash flow? Our preference is clear – cash flow takes the lead.

Cap rate is a gauge, but remember, it's not the one padding your pockets at day's end.

Ready for some enlightening insights? Tune into this jam-packed episode where we unravel crucial information.

Click below to start listening – your guide to informed investment awaits!

See our current investment deals here:
https://www.homeinvest.com/home-invest--offerings

If you are an accredited investor and would like to have a conversation with us, click here to schedule a call with us:
https://www.homeinvest.com/podcast

see our current investment deals here:
https://www.homeinvest.com/home-invest--offerings

if you are an accredited investor and would like to have a conversation with us, click here to schedule a call with us
https://www.homeinvest.com/podcast

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