Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

Cap Rates Don't Matter

29 Sept 2022 · 1 min

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0:34

A real estate investor argues cap rates don't matter if you're holding forever and running the property actively. He bought a 38-unit building at negative 1.5% cap rate with his partner Cody that lost money when tenants didn't pay. For long-term owners, what matters is how you'll own it and what the seller really wants.

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Cap rate may matter a little bit to you. If you are an active investor like I am, I don't care at all. Our biggest deal that we've done to date is the 38-plex that Cody and I took out early in our career. We bought that on a -1.5 cap and actually lost money operating because they had so many non-paying tenants. But you weren't going to own it for a year. No. If you're going to own it forever, there's only two questions that we ask in an analysis. It's how do we own it, which is what is the actual opportunity? And what do the sellers need, and how do we never lose it? If I'm never selling it, I don't care at all what the cap rate's for.