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{"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 – Low Cap Rates Are Killers"},"content":{"rendered":"

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>
\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

“I have a 200 Million real estate portfolio”<\/strong><\/p>\n

To the average neophyte, this sounds impressive. And it very well maybe. Especially if it was purchased during the previous recession – 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

BUT WHAT ABOUT THE GUY THAT STARTED BUYING IN 2014 and brags about his 200 MILLION PORTFOLIO?<\/strong><\/p>\n

Lets consider the facts:<\/p>\n

Cap Rates in most tier 1 and even popular tier 2 markets around high 4 cap rates or maybe low 5’s. Of course, everyone thinks that they are buying an 8…..until the numbers actually present themselves in the lack of distributions.<\/p>\n

So here is some quick math:<\/strong><\/p>\n

\n
$200,000,000 Million of real estate that was purchased on CAP RATES of 5% will yield a net operating income of $10,000,000 per year.\u00a0<\/strong><\/li>\n
Assuming an all debt transaction (No Equity) the annual (P&I) payments assuming a 4% Interest Rate over 30 years are $11.457,967.09<\/strong><\/li>\n
At the end of 12 months, you have lost $1,457,967.09<\/span><\/strong><\/li>\n<\/ul>\n
YOU READ THAT CORRECTLY<\/strong><\/p>\n
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
http:\/\/www.loopnet.com\/Listing\/533-Evergreen-St-Inglewood-CA\/11386063\/<\/p>\n
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
Interested In Learning How To Make 100% Returns On Your Money? Get My Free, 10-Part Course<\/strong><\/span><\/p>\n