{"id":1601,"date":"2018-02-14T19:02:09","date_gmt":"2018-02-14T19:02:09","guid":{"rendered":"https:\/\/www.grouphomeriches.com\/?p=1601"},"modified":"2018-02-14T19:02:09","modified_gmt":"2018-02-14T19:02:09","slug":"multi-family-cap-rates-all-that-glitters-is-not-gold","status":"publish","type":"post","link":"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/","title":{"rendered":"Why A $200,000,000 REAL ESTATE PORTFOLIO SOUNDS BETTER THAN IT ACTUALLY IS &#8211; Low Cap Rates Are Killers"},"content":{"rendered":"<p><strong>Learn why a $200,000,000 (Two Hundred Million) Real Estate Portfolio MAY (MAY) sound better than it actually is. HINT: CAP RATES ARE EXTREMELY IMPORTANT. IF YOU ARE BUYING 4 CAP RATES YOU MAY WANT TO READ THIS!<\/strong><br \/>\nEveryone loves to brag. The guys in the local business journals. The guys in the Wall Street Journal. The guys on YOUTUBE. What do they say?<\/p>\n<p style=\"text-align: center;\"><strong>&#8220;I have a 200 Million real estate portfolio&#8221;<\/strong><\/p>\n<p style=\"text-align: left;\">To the average neophyte, this sounds impressive. And it very well maybe. Especially if it was purchased during the previous recession &#8211; or possibly you are an OLD SCHOOL Billionaire like Donald Sterling with tens of thousands of units. Someone in either of those positions is DEFINITELY in a position to brag.<\/p>\n<p style=\"text-align: left;\"><strong>BUT WHAT ABOUT THE GUY THAT STARTED BUYING IN 2014 and brags about his 200 MILLION PORTFOLIO?<\/strong><\/p>\n<p style=\"text-align: left;\">Lets consider the facts:<\/p>\n<p style=\"text-align: left;\">Cap Rates in most tier 1 and even popular tier 2 markets around high 4 cap rates or maybe low 5&#8217;s. Of course, everyone thinks that they are buying an 8&#8230;..until the numbers actually present themselves in the lack of distributions.<\/p>\n<p style=\"text-align: left;\"><strong>So here is some quick math:<\/strong><\/p>\n<ul>\n<li style=\"text-align: left;\">$200,000,000 Million of real estate that was purchased on CAP RATES of 5% will yield a net operating income of <strong>$10,000,000 per year.\u00a0<\/strong><\/li>\n<li style=\"text-align: left;\">Assuming an all debt transaction (No Equity) the annual (P&amp;I) payments assuming a 4% Interest Rate over 30 years are <strong>$11.457,967.09<\/strong><\/li>\n<li style=\"text-align: left;\"><strong>At the end of 12 months, you have lost <span style=\"color: #ff0000;\">$1,457,967.09<\/span><\/strong><\/li>\n<\/ul>\n<p style=\"text-align: center;\"><strong>YOU READ THAT CORRECTLY<\/strong><\/p>\n<p style=\"text-align: center;\"><strong>THE GUY BRAGGING ABOUT HIS $200,000,000 REAL ESTATE PORTFOLIO IS LOSING MONEY because he is buying stuff like this (and these advertised cap rates are way higher than actual)<\/strong><\/p>\n<p>http:\/\/www.loopnet.com\/Listing\/533-Evergreen-St-Inglewood-CA\/11386063\/<\/p>\n<p style=\"text-align: left;\">Can he make this up by selling if the property value goes to $250,000,000? Yes! But from a pure cashflow standpoint, it is risky.<\/p>\n<p style=\"text-align: left;\"><span style=\"color: #ff0000;\"><strong>Interested In Learning How To Make 100% Returns On Your Money? Get My Free, 10-Part Course<\/strong><\/span><\/p>\n<p style=\"text-align: left;\"><script type=\"text\/javascript\">var gform;gform||(document.addEventListener(\"gform_main_scripts_loaded\",function(){gform.scriptsLoaded=!0}),window.addEventListener(\"DOMContentLoaded\",function(){gform.domLoaded=!0}),gform={domLoaded:!1,scriptsLoaded:!1,initializeOnLoaded:function(o){gform.domLoaded&&gform.scriptsLoaded?o():!gform.domLoaded&&gform.scriptsLoaded?window.addEventListener(\"DOMContentLoaded\",o):document.addEventListener(\"gform_main_scripts_loaded\",o)},hooks:{action:{},filter:{}},addAction:function(o,n,r,t){gform.addHook(\"action\",o,n,r,t)},addFilter:function(o,n,r,t){gform.addHook(\"filter\",o,n,r,t)},doAction:function(o){gform.doHook(\"action\",o,arguments)},applyFilters:function(o){return gform.doHook(\"filter\",o,arguments)},removeAction:function(o,n){gform.removeHook(\"action\",o,n)},removeFilter:function(o,n,r){gform.removeHook(\"filter\",o,n,r)},addHook:function(o,n,r,t,i){null==gform.hooks[o][n]&&(gform.hooks[o][n]=[]);var e=gform.hooks[o][n];null==i&&(i=n+\"_\"+e.length),gform.hooks[o][n].push({tag:i,callable:r,priority:t=null==t?10:t})},doHook:function(n,o,r){var t;if(r=Array.prototype.slice.call(r,1),null!=gform.hooks[n][o]&&((o=gform.hooks[n][o]).sort(function(o,n){return o.priority-n.priority}),o.forEach(function(o){\"function\"!=typeof(t=o.callable)&&(t=window[t]),\"action\"==n?t.apply(null,r):r[0]=t.apply(null,r)})),\"filter\"==n)return r[0]},removeHook:function(o,n,t,i){var r;null!=gform.hooks[o][n]&&(r=(r=gform.hooks[o][n]).filter(function(o,n,r){return!!(null!=i&&i!=o.tag||null!=t&&t!=o.priority)}),gform.hooks[o][n]=r)}});<\/script>\n                <div class='gf_browser_gecko gform_wrapper gform_legacy_markup_wrapper' id='gform_wrapper_1' >\n                        <div class='gform_heading'>\n                            <h3 class=\"gform_title\">Contact Form<\/h3>\n                            <span class='gform_description'><\/span>\n                        <\/div><form method='post' enctype='multipart\/form-data'  id='gform_1'  action='\/wp-json\/wp\/v2\/posts\/1601' >\n                        <div class='gform_body gform-body'><ul id='gform_fields_1' class='gform_fields top_label form_sublabel_below description_below'><li id=\"field_1_3\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_3\"><label class='gfield_label' for='input_1_3' >Name<\/label><div class='ginput_container ginput_container_text'><input name='input_3' id='input_1_3' type='text' value='' class='large'    placeholder='Name'  aria-invalid=\"false\"   \/> <\/div><\/li><li id=\"field_1_7\"  class=\"gfield gfield_contains_required field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_7\"><label class='gfield_label' for='input_1_7' >Email<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_email'>\n                            <input name='input_7' id='input_1_7' type='text' value='' class='large'   placeholder='Email' aria-required=\"true\" aria-invalid=\"false\"  \/>\n                        <\/div><\/li><li id=\"field_1_2\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_2\"><label class='gfield_label' for='input_1_2' >Subject<\/label><div class='ginput_container ginput_container_text'><input name='input_2' id='input_1_2' type='text' value='' class='large'    placeholder='Subject'  aria-invalid=\"false\"   \/> <\/div><\/li><li id=\"field_1_5\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_5\"><label class='gfield_label' for='input_1_5' >Message<\/label><div class='ginput_container ginput_container_textarea'><textarea name='input_5' id='input_1_5' class='textarea medium'    placeholder='Message*'  aria-invalid=\"false\"   rows='10' cols='50'><\/textarea><\/div><\/li><\/ul><\/div>\n        <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_1' class='gform_button button' value='Submit'  onclick='if(window[\"gf_submitting_1\"]){return false;}  window[\"gf_submitting_1\"]=true;  ' onkeypress='if( event.keyCode == 13 ){ if(window[\"gf_submitting_1\"]){return false;} window[\"gf_submitting_1\"]=true;  jQuery(\"#gform_1\").trigger(\"submit\",[true]); }' \/> \n            <input type='hidden' class='gform_hidden' name='is_submit_1' value='1' \/>\n            <input type='hidden' class='gform_hidden' name='gform_submit' value='1' \/>\n            \n            <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' \/>\n            <input type='hidden' class='gform_hidden' name='state_1' value='WyJbXSIsIjUyZWNkODNiYWI4NzI3MGYxOWYyYzdhMGYwNTA1ZjcxIl0=' \/>\n            <input type='hidden' class='gform_hidden' name='gform_target_page_number_1' id='gform_target_page_number_1' value='0' \/>\n            <input type='hidden' class='gform_hidden' name='gform_source_page_number_1' id='gform_source_page_number_1' value='1' \/>\n            <input type='hidden' name='gform_field_values' value='' \/>\n            \n        <\/div>\n                        <p style=\"display: none !important;\" class=\"akismet-fields-container\" data-prefix=\"ak_\"><label>&#916;<textarea name=\"ak_hp_textarea\" cols=\"45\" rows=\"8\" maxlength=\"100\"><\/textarea><\/label><input type=\"hidden\" id=\"ak_js_1\" name=\"ak_js\" value=\"65\"\/><script>document.getElementById( \"ak_js_1\" ).setAttribute( \"value\", ( new Date() ).getTime() );<\/script><\/p><\/form>\n                        <\/div><\/p>\n<p style=\"text-align: left;\">\n<p style=\"text-align: center;\">\n<p style=\"text-align: center;\"><strong>LETS TAKE THE RISK OUT OF THE CAP RATES AND INCREASE THEM A BIT. LETS ALSO PUT SOME EQUITY INTO THE TRANSACTION.\u00a0<\/strong><\/p>\n<p style=\"text-align: left;\">OK, now lets assume that the 200M of real estate was bought on an average of 5.5 &#8211; basically cap rates that avg out to 5.5%. Lets also assume that the owner (owners) injected 20% equity into the project:<\/p>\n<p style=\"text-align: left;\"><strong>TOTAL DEBT: $160,000,000<\/strong><\/p>\n<p style=\"text-align: left;\">Interest Rate: 4%<\/p>\n<p style=\"text-align: left;\">Cap Rates: 5.5%<\/p>\n<p style=\"text-align: left;\">NET OPERATING INCOME: $11,000,000<\/p>\n<p style=\"text-align: left;\">Monthly P&amp;I payments: $763,864.47<\/p>\n<p style=\"text-align: left;\">Annual P&amp;I Payment: $9,166,373.67<\/p>\n<p style=\"text-align: left;\"><strong>NET INCOME BEFORE DEPRECIATION ETC = $1,833,626<\/strong><\/p>\n<p style=\"text-align: left;\">Look, this is BIG MONEY. And the guy pulled off about a<strong> 9.1% CASH ON CASH RETURN<\/strong> on his money when he bought the portfolio with a blended avg. of <strong>5.5% CAP RATES&#8230;..<\/strong><\/p>\n<p style=\"text-align: left;\"><strong>BUT HOW MANY PEOPLE ACTUALLY HAVE $20,000,000 to put down?<\/strong><\/p>\n<p style=\"text-align: left;\">If they raised $20,000,000 what guaranteed return would they need to offer their investors? And what % of the deal would they get for themselves?<\/p>\n<p style=\"text-align: left;\">Obviously, people have gotten tremendously wealth with this formula. But for the avg individual, this is very HARD to pull off. Assuming no appreciation and assuming an 8% pref, there is roughly $18,336 left for the GP&#8217;s to divvy up with their LP&#8217;s&#8230;..hardly a feast for anyone &#8211; unless you live in Venezuela!<\/p>\n<p style=\"text-align: left;\">I show people a very simple formula that I have used to create monthly passive income. You won&#8217;t become a millionaire overnight. And quite frankly, this is not a formula for someone that already has 7 figures saved up. This is the exact formula that I used to retire by first creating a $3,000 passive income stream and then repeating the process 10X over. Just 2 little properties can get you to $6,000 per month which is enough for most people to live comfortably on&#8230;..ESPECIALLY IF THEY DONT HAVE TO WORK FOR IT!<\/p>\n<p style=\"text-align: left;\"><strong>Sign up today for my free 10-part wealth building course. You Will Be Glad You Did<\/strong><\/p>\n<p style=\"text-align: left;\">\n                <div class='gf_browser_gecko gform_wrapper gform_legacy_markup_wrapper' id='gform_wrapper_1' >\n                        <div class='gform_heading'>\n                            <h3 class=\"gform_title\">Contact Form<\/h3>\n                            <span class='gform_description'><\/span>\n                        <\/div><form method='post' enctype='multipart\/form-data'  id='gform_1'  action='\/wp-json\/wp\/v2\/posts\/1601' >\n                        <div class='gform_body gform-body'><ul id='gform_fields_1' class='gform_fields top_label form_sublabel_below description_below'><li id=\"field_1_3\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_3\"><label class='gfield_label' for='input_1_3' >Name<\/label><div class='ginput_container ginput_container_text'><input name='input_3' id='input_1_3' type='text' value='' class='large'    placeholder='Name'  aria-invalid=\"false\"   \/> <\/div><\/li><li id=\"field_1_7\"  class=\"gfield gfield_contains_required field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_7\"><label class='gfield_label' for='input_1_7' >Email<span class=\"gfield_required\"><span class=\"gfield_required gfield_required_asterisk\">*<\/span><\/span><\/label><div class='ginput_container ginput_container_email'>\n                            <input name='input_7' id='input_1_7' type='text' value='' class='large'   placeholder='Email' aria-required=\"true\" aria-invalid=\"false\"  \/>\n                        <\/div><\/li><li id=\"field_1_2\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_2\"><label class='gfield_label' for='input_1_2' >Subject<\/label><div class='ginput_container ginput_container_text'><input name='input_2' id='input_1_2' type='text' value='' class='large'    placeholder='Subject'  aria-invalid=\"false\"   \/> <\/div><\/li><li id=\"field_1_5\"  class=\"gfield field_sublabel_below field_description_below gfield_visibility_visible\"  data-js-reload=\"field_1_5\"><label class='gfield_label' for='input_1_5' >Message<\/label><div class='ginput_container ginput_container_textarea'><textarea name='input_5' id='input_1_5' class='textarea medium'    placeholder='Message*'  aria-invalid=\"false\"   rows='10' cols='50'><\/textarea><\/div><\/li><\/ul><\/div>\n        <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_1' class='gform_button button' value='Submit'  onclick='if(window[\"gf_submitting_1\"]){return false;}  window[\"gf_submitting_1\"]=true;  ' onkeypress='if( event.keyCode == 13 ){ if(window[\"gf_submitting_1\"]){return false;} window[\"gf_submitting_1\"]=true;  jQuery(\"#gform_1\").trigger(\"submit\",[true]); }' \/> \n            <input type='hidden' class='gform_hidden' name='is_submit_1' value='1' \/>\n            <input type='hidden' class='gform_hidden' name='gform_submit' value='1' \/>\n            \n            <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' \/>\n            <input type='hidden' class='gform_hidden' name='state_1' value='WyJbXSIsIjUyZWNkODNiYWI4NzI3MGYxOWYyYzdhMGYwNTA1ZjcxIl0=' \/>\n            <input type='hidden' class='gform_hidden' name='gform_target_page_number_1' id='gform_target_page_number_1' value='0' \/>\n            <input type='hidden' class='gform_hidden' name='gform_source_page_number_1' id='gform_source_page_number_1' value='1' \/>\n            <input type='hidden' name='gform_field_values' value='' \/>\n            \n        <\/div>\n                        <p style=\"display: none !important;\" class=\"akismet-fields-container\" data-prefix=\"ak_\"><label>&#916;<textarea name=\"ak_hp_textarea\" cols=\"45\" rows=\"8\" maxlength=\"100\"><\/textarea><\/label><input type=\"hidden\" id=\"ak_js_2\" name=\"ak_js\" value=\"134\"\/><script>document.getElementById( \"ak_js_2\" ).setAttribute( \"value\", ( new Date() ).getTime() );<\/script><\/p><\/form>\n                        <\/div><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Learn why a $200,000,000 (Two Hundred Million) Real Estate Portfolio MAY (MAY) sound better than it actually is. HINT: CAP RATES ARE EXTREMELY IMPORTANT. IF YOU ARE BUYING 4 CAP RATES YOU MAY WANT TO READ THIS! Everyone loves to brag. The guys in the local business journals. The guys in the Wall Street Journal. <a href=\"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/\" class=\"more-link\">&#8230;<span class=\"screen-reader-text\">  Why A $200,000,000 REAL ESTATE PORTFOLIO SOUNDS BETTER THAN IT ACTUALLY IS &#8211; Low Cap Rates Are Killers<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":1603,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[184,30,32,6,21,15,12],"class_list":["post-1601","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-wealth","tag-assisted-living","tag-finances","tag-getting-started","tag-group-home","tag-group-home-business-plan","tag-how-to-make-money","tag-success"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.3 (Yoast SEO v21.8) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Cap-Rates-Multi-Family-Real-Estate-and-Fools-Gold-All-That-Glitters-Is-Not<\/title>\n<meta name=\"description\" content=\"Why Multi Family Cap Rates Impact Actual Net Income For Investors And Why All That Glitters Is Not Gold and Why Low Cap Rates Can Ruin An Investment.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why A $200,000,000 REAL ESTATE PORTFOLIO SOUNDS BETTER THAN IT ACTUALLY IS - Low Cap Rates Are Killers\" \/>\n<meta property=\"og:description\" content=\"Why Multi Family Cap Rates Impact Actual Net Income For Investors And Why All That Glitters Is Not Gold and Why Low Cap Rates Can Ruin An Investment.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/\" \/>\n<meta property=\"og:site_name\" content=\"Group Home Riches\" \/>\n<meta property=\"article:published_time\" content=\"2018-02-14T19:02:09+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/grouphomeriches.com\/wp-content\/uploads\/2018\/02\/Actual-Cap-Rates-Maybe-Killing-You.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"856\" \/>\n\t<meta property=\"og:image:height\" content=\"602\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"admin\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"admin\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/grouphomeriches.com\/multi-family-cap-rates-all-that-glitters-is-not-gold\/\"},\"author\":{\"name\":\"admin\",\"@id\":\"https:\/\/grouphomeriches.com\/#\/schema\/person\/9d2a26d4b9a5d99d2edc32e43c546837\"},\"headline\":\"Why A $200,000,000 REAL ESTATE PORTFOLIO SOUNDS BETTER THAN IT ACTUALLY IS &#8211; 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