A cap rate is one number, and it decides almost everything. On this episode of The Route, Jason and Abe drove from the Margate office across Alligator Alley to Fort Myers to walk three industrial properties: a 5,300-square foot single tenant building, a brand new 10,200-square foot warehouse on Van Buren, and a 25,000-square foot spread across three buildings on Fowler Street. They ran the cap rate on every one of them before they ever got out of the truck, and by the end of the day they had walked away from the biggest deal of the three. Here is the math, out loud, on real buildings.
What a cap rate actually is, and why 6 versus 7 is the whole conversation
A capitalization rate is net operating income divided by price. That's it. If a building throws off $84,000 a year after the operating expenses the owner still pays, and you buy it for $1.35 million, you own a 6.2 cap. Buy that same $84,000 for $1.2 million and you own a 7. Nothing about the building changed. Only the price did.
That is why the entire negotiation on a stabilized property collapses into one question: what cap are we buying at? A higher cap rate means you are paying less for the same income, better for a buyer and worse for a seller. So when a broker tells you "it's a six," what he is really telling you is his asking price, expressed as a yield.
On the first property, the seller was asking $1.35 million on $84,000 of NOI and calling it a six. Close enough to true. The team's number was a 7 to 7.5 cap, which puts the building at $1.12 to $1.2 million. That gap, $150,000 to $230,000, is the deal.
Get on every broker's email list before you need it
Before any of this matters, you need something to run the numbers on. The fastest way to see more deals is the least technical thing in the episode: talk to brokers, and then ask every single one to put you on their email list.
Brokers send the email before the listing goes up on the public sites. That window, a few days and sometimes a few hours, is where off market and pre market deals live. "Keep us in mind" does nothing. Being on the list means you get the blast automatically, every time.
It compounds, too. The more deals you actually close, the faster brokers send you the next one, because brokers route product to buyers who perform. The relationship first approach is the same one that opened the private money conversations in The Route EP 2.
Property one: the math worked, the building didn't
5,300 square feet, one tenant: a countertop fabrication and painting company serving high end residential and commercial builders. Newly executed five year absolute triple net lease with 4% annual rent escalations and personal guarantees. On paper this is exactly what you want.
Then they walked it. The location is set back inside an industrial plaza, which is normal for this asset class, and it has usable outdoor storage on two sides, genuinely valuable to an industrial tenant. But the building itself is metal. "It's legit a shipping container," is how it got described on camera.
At a $1.35 million ask on 5,300 feet, that's about $255 a square foot for a metal box. The numbers penciled. The construction did not. The same walk it before you price it discipline is the whole subject of The Route EP 1.
What "absolute triple net with personal guarantees" really buys you
Triple net means the tenant pays the three nets, property taxes, insurance, and maintenance, on top of base rent. Absolute triple net goes further: the tenant carries essentially everything, including the structural items most landlords keep. As an owner you are closer to holding a bond than managing a building.
Two details do more work than the lease type itself. A personal guarantee puts the tenant's principal on the hook personally if the entity stops paying, which turns a corporate promise into a personal one. And a 4% annual escalation compounds your NOI, and therefore your value at any given cap rate, every year you hold it.
That combination is why a newly signed absolute NNN lease with guarantees and 4% bumps deserves a lower cap rate than a month to month tenant on a handshake. You are not buying square footage. You are buying an income stream and the strength of the person behind it, which is the same underwriting logic applied to the Burger King deal on the podcast.
Property two: brand new, no price, and the $300 a foot problem
The Van Buren property is 10,200 square feet of brand new construction with a fresh ten year absolute triple net lease at $16 a square foot and 4% annual increases. That's about $163,000 of NOI. The tenant sells and repairs RVs, a narrow business with almost no local competition and real demand, which the team liked.
There was no asking price, which is its own signal. Run it forward anyway: at a 6 cap, $163,000 of NOI supports roughly $2.7 million. Call it $3 million and you are actually buying a 5.4 cap, and paying nearly $300 a square foot.
Is $300 a foot crazy? It depends entirely on what you are getting. On a metal building, yes. On genuinely new concrete construction it is defensible, because materials and contracting have pushed replacement cost north of $200 a foot on their own. So the sequence is: structure first, location second, tenant research third, price last. Find out how big the RV business really is, whether it has other locations, and how much of its revenue runs through this address, then negotiate.
Property three: 25,000 square feet, three buildings, and why we passed
The Fowler Street property is the biggest of the day: 25,000 square feet across three buildings, 23 grade level doors, outdoor storage, yard and parking, new TPO roofs, renovations through 2025 and 2026, and new asphalt and fencing on the way. The seller's claim was roughly $38,000 a month in rent, call it $456,000 a year, with the tenants covering taxes, insurance, and maintenance.
Boots on the ground told a different story. One of the three buildings was completely vacant. Two tenants had merged because they did the same thing. And the people on site were openly hostile about a camera and a couple of buyers walking the property they occupy.
None of that shows up in a spreadsheet, and all of it matters. Tenant profile is not a soft factor. It is the difference between collecting rent and running an eviction. Evicting a tenant in a building you just bought is expensive, slow, and entirely avoidable if you go look first. So they passed.
Ninety percent of what you look at, you don't buy
That is the real hit rate, and it is not a failure rate. Every property that gets walked and rejected sharpens the standard for the one that gets bought. You cannot build that judgment from a listing photo or a broker's cap rate claim.
Three warehouses, one long drive, and one walk away is a normal day. Put boots on the ground, run your own numbers, research the tenant, and be willing to leave. The discipline behind that is exactly what The Price Perspective EP 1 is about.