Cap rates are one aspect of any deal. Cap rates are vital and fundamental, but they're only one aspect.
A cap rate only represents a snapshot of the past. You are taking the current income and expenses. But, there is nothing in this formula that takes into account new renovations, different management, differences in marketing, and so on. These factors may make the cap rate rise or fall as the investment term progresses.
But appreciation is always possible, but it depends on the market. Your rent and net operating income are more predictable than the market. Keep in mind that income from a building is not the only way you can make money in realty.
Cap rates can vary by region. In NYC, the cap rate of 6.6% will apply to a property that is not in NYC. Real estate investors should remember that cities with higher populations tend to have lower cap rates. This means that they have lower capitalization rates.
Your investment goals and criteria are another important aspect to be aware of. Knowing your investment criteria and goals will help you determine the best deals for you and your investors.
Cap rate does not take appreciation into account. Multifamily properties are able to appreciate, and do. This has an impact on what constitutes a good multifamily property cap rate. Let's take San Francisco as an example. Why is it so low in cap rates? The land underneath is so highly valued that there's been some appreciation potential in the past, even though it has a low ROI.
The bottom line: What is the best cap rate for multifamily properties? This question isn't answered by a single "good" cap rate. Many factors, including risk appetite and geographic location, play into whether or not a caprate rate is reasonable.