Cap Rates & COC for buy-and-hold in Raleigh-Durham-Chapel Hill?

[Mark Stevenson]

Would be curious if anyone might be able to share what kind of Cap Rates and COC returns you typically see in buy-and-hold SFH and 2-4 unit MFs, in the Raleigh-Durham-Chapel Hill area.

I've been looking primarily in Chapel Hill and some in Durham. If trying to get into A-or B-level neighborhoods, it seems a very high cost for lower returns. Maybe it's just lack of inventory, but best case seems to be a 6% cap rate. And with housing costs so high, some are negative cash flow, but COC return no better than 4-5%. (Obviously that's highly variable based on financing, but I'm looking at 20-25% down.) The 1% rule for rental rates just doesn't seem possible, maybe 0.9% at high end, more likely 0.75%.

There are definitely some better numbers in lower income areas of Durham, but there's obviously higher tenant risk in those areas and I'm generally hoping to find units in high performing school districts for long term reliable tenants.

Are these numbers in line with what you have seen historically? Are the numbers any better in Raleigh, Cary or elsewhere? I'm not often east of the airport so don't know those areas at all.

I'd prefer to stay local (though would still be using property mgmt company), but have also looked at some turnkey properties. Obviously you pay a premium, but even with that, and after adjusting for some of the rosy numbers these companies suggest, there still seem to be many with cap rates of 9-10% and COC return of 15-20%. I don't have any info about neighborhoods, so these may be in undesirable neighborhoods and may be poor comparisons.

Would love to hear from anyone who may have thoughts on any of the above. Thanks! :)