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I hate to burst your bubble there buddy but nobody on this forum is making any sense of your incoherent cap rate diatribes.
You have been arguing nonsense with everyone on this forum (and many other internet forums). You can literally do a search under "cap rates" on google and your handle pops up. All with the same net result - people scratching their heads in bemusement. Ever think that maybe there is a common denominator in all this?
Just admit you've lost your marbles and move on.
In your case, the person replying "You are so wrong, it's funny!" appears to be employing appeal to ridicule in place of a legitimate argument. Please note, however, that bringing this to their attention is unlikely to convince them to present a real argument, and will likely provoke a series of ad hominem attacks.
Aren't you the guy that is predicting these are all gonna fall down after 50 years? Ha Ha
No I didn't say they are going to fall down. But for those condos built in the 60's and 70's, the realities of several decades of deferred maintenance will rear its ugly head. Give it another 10 years or so and watch as these buildings get hit with massive special assessments and/or big increases in maintenance fees that will force many owners to sell their units. Middle class citizens who own these older condos (which are now beyond 50 years old) can't afford $1,000/mo maintenance fees on 600 SF units. Since they can't afford the fees and the affluent don't want to live or own in these old slummy buildings, they will start dumping these units en masse. As a result, prices will plummet. All condos that are not targeted at the rich will eventually be gutted and rebuilt, repurposed or demolished in the future.
Condo ownership is a game of hot potato... eventually someone is going to get burned. My opinion is it's best to not play the game at all. Single family homes and duplexes (and in some cases, multifamily) where you own and control the land and building are the only long term investments in real property one should make.
I know my comments over the last few years about high rise condos being terrible investments caused some butt hurt (because you're a big condo fan)... but this a forum where we share our opinions without the concern of others that may disagree. More and more people will agree with my sentiment; just a matter of time.
Did we lose you LostVector? Are you still interested in learning correct information about cap rates?
If you still think a cap rate is a profit metric can you tell me which is more profitable,
1. A $10,000 NOI bought at a 5% cap rate?
2. A $10,000 NOI bought at a 10% cap rate?
Perhaps you could enlighten me as to which of the following is more profitable?
1. $100,000 invested at a 5% cap rate
2. $100,000 invested at a 10% cap rate
Perhaps you could enlighten me as to which of the following is more profitable?
1. $100,000 invested at a 5% cap rate
2. $100,000 invested at a 10% cap rate
Gladly, neither. A cap rate is not a profit metric. It is merely a measurement of what the market is paying for a potential NOI. It does reflect the higher demand for the 5% NOI since there are more dollars per potential NOI dollar bid.
Think of $ per square foot. You can buy a property in Tennessee for $100 per sf. A very similar property in Honolulu could well sell for $600 per sf but that information does not tell you which property will be more profitable.
Gladly, neither. A cap rate is not a profit metric. It is merely a measurement of what the market is paying for a potential NOI. It does reflect the higher demand for the 5% NOI since there are more dollars per potential NOI dollar bid.
Think of $ per square foot. You can buy a property in Tennessee for $100 per sf. A very similar property in Honolulu could well sell for $600 per sf but that information does not tell you which property will be more profitable.
What do you define a profit metric as? NOI? Since cap rate is derived from market value and NOI, doesn't that make cap rate a profit metric also?
First of all I completely understand that cap rates are only one measure of a property's performance as an investment; there is a lot more to consider than just the cap rate. I also understand that properties with lower cap rates are inherently more desirable than properties with higher cap rates (people are willing to pay more money for less cash flow because of lower risk and higher potential for long term appreciation).
I have local friends that foolishly go off island and buy rental property in far away states because of the much higher cap rates available there. Honolulu has historically returned the lowest cap rates in the country - often by a significant margin.
I am not advocating cap rates as the be-all and end-all of property valuation metrics. I am only disagreeing with these central points you're stubbornly (and incorrectly) trying to make -
1) 0% cap rates do not and cannot exist
2) Cap rates are not a performance metric
3) Cap rates can ONLY be used to gauge the performance of commercial property - not SFH or condos
I have actually argued for years with other investors that properties with the lowest cap rates can actually outperform those properties with the highest cap rates. But when it becomes fairly common that cap rates on properties approach zero (or yes, even get to zero), they become highly speculative and USUALLY signals the harbinger of a housing correction.
Zero and near-zero cap rates are not sustainable. Either rents/hotel revenue need to increase or prices will correct. You are betting on appreciation and big increases in rent to justify a real estate acquisition. That's reckless and irresponsible, in my humble opinion.
Caps rates inHI mean nothing, nothing, nothing....................lol. Ive been waiting for a correction for 15 yeras and cap rates only get worse.
Sorry BOB if im not using cap rates korrectly.
1. Well there is no such thing as a "worse" cap rate.
2. The metrics that cap rates measure HAVE changed over 15 years, rents, expenses and values so there has been economic change.
3. It is a tool. I don't care if you bang a nail with a screwdriver. When I see it used incorrectly I point it out and offer to explain correct useage.
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