Keith Sorem, Real Estate Pro in Glendale, CA

How important is the cap rate for income property of four units or under?

Asked by Keith Sorem, Glendale, CA Sat May 12, 2007

Describe the relevance of cap rate and GRM in income property value

Help the community by answering this question:


This is a great question. I'll answer from a financing perspective. The cap rate is NOT as important when trying to secure good financing for a 4 and under because they are residential loans. It is all important for a 5+ because that is a commercial loan and rate is determined by DSCR. From a valuation perspective, I think it is equally important in any case but I'd defer to a real estate expert. I'd be interested in your opinion, Keith. I hope this link to an article I wrote helps:
2 votes Thank Flag Link Sat May 12, 2007
Is it commercial or residential?

I would say that for commercial its extremely important, less so for residential. There is more wiggle room in residential. My guess is because commercial renters are primarily interested in square footage. Hope this helps.
Web Reference:
0 votes Thank Flag Link Sat May 12, 2007
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer