Key rate of return for Multifamily apartment complexes- Steve Peterson
What’s a good rate of return that you should be looking at when you look at real estate…yeah well excellent question now theres within multi family theres different classes of assets right. you know the A. apartments that are brand new typical in the last 10 years in a better neighborhood B. apartments are buildings up to 20 years old im middle income neighborhoods. C. are buildings that are built that are older than 20 years old. in a kind of lower income neighborhoods D. properties are older buildings in war zone type neighborhoods ..
Right so in all these market places you can make money but what it is, the rate to returns are going to vary so your not going to make the rate of return from a cash flow stand point on a A. property a brand new building that you would on a C property thats 30 years old and maybe in east Oakland however when you look at internal rate of return the overal growth of the asset and every thing eles in A neighborhoods B. neighborhoods thats probably where your going to get your better internal rate of return in C. neighborhoods and D. neighborhoods thats where your going to get your better cashflow your better cash on cash rate of return so it really depends on what your investment strategy is and what your risk tolerance is how much liquid capital you have available , how much management experience you have or what your network is in other words, do you have experts that are property mangers, do yo have experts that can fix contractors that can fix issues when they pop up do you not know anybody.
So your rate of return are going to vary and what i would just say for me and my investors were typical looking at 10% cash on cash return 20% internal rate of return and were typical looking at C. and B. properties institutional investors . i have a couple institutional investors clients they’re looking at A properties. There looking at anywhere between 6 and 8% cash on cash return and really anywhere from13 to 15% internal rate of return. So there requirements are a little bit less but looking for that trophy asset so it really varies for me and for my client base were looking for 20% ROI cash on cash 20% internal rate of return.
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