If you’re still asking, “What cap rate should I buy at?”—you’re already asking the wrong question.
Cap rates are just marketing hype.
They’re a headline. A shiny distraction.
But they don’t protect your cash flow, and they don’t save your deal.
In this episode of the Small Axe Podcast, I break down exactly why cap rates are meaningless without real underwriting—and why trusting a broker’s proforma could destroy your investment.
🚨 The Truth Behind Cap Rates
Brokers love flashing a “7% cap rate” or “8% cap rate” to make deals look juicy.
But if the expenses are fake and the CapEx tsunami is lurking around the corner,
then that shiny cap rate turns into negative cash flow fast.
Here’s what most investors miss:
-
C-Class properties don’t operate at 25%-30% expenses.
In reality, it’s 45%-50% or more. -
CapEx is inevitable.
Roofs, HVACs, plumbing—everything ages and needs replacement. -
Closing costs, reserves, and real maintenance budgets matter.
They dramatically change your true “all-in” basis—and your cash-on-cash return.
🧠 You’re Not Buying a Cap Rate
You’re buying an operation.
A living, breathing, expensive machine that requires fuel, repairs, and constant management.
If you walk into a property without budgeting at least $8,000 to $10,000 per unit for future capital expenditures,
you’re setting yourself up to fail.
If you’re not factoring in real maintenance costs (not broker fantasy numbers),
you’re setting yourself up to bleed cash.
🔥 What You Should Be Asking Instead
-
Are these actual expenses or broker “projections”?
-
What’s the true expense ratio based on real-world operations?
-
How much deferred maintenance and CapEx is lurking behind the walls?
-
Are there real reserves built into the numbers?
-
What’s the historical vacancy and bad debt in this neighborhood?
🪓 Stay Sharp, Stay Dangerous, Stay Small Axe Strong
Stop shopping for cap rates.
Start shopping for real cash flow, real durability, and real risk management.
At Small Axe Communities, we don’t chase cap rates—we build empires with math, not marketing.
Sharpen your axe. Build your empire.
Let’s go.
👉 Want more straight talk on real estate investing?
Subscribe to the Small Axe Communities Newsletter [insert your link]
🎙 And don’t forget to catch the full episode on Apple Podcasts, Spotify, and YouTube!
