Why buy larger apartment buildings?
Hi All,
I am selling a duplex for 2.3 mil. I am doing a 1031 exchange. Based on the 200% rule I can buy as many properties I want as long as they don't exceed 200% of the sale of my property. I want to split the money into multiple properties mostly higher cash flow and some in areas that have good appreciation (Austin, Houston). Looking at apartment buildings it appears the bigger the building the smaller your cap rate is. It appears that the best cap rate is looking at SFR or duplexes. I know a lot of investors goals are to own big apartment buildings and I am curious as to why? It would seem to me that they would be harder to resell, wouldn't appreciate as fast, and your cash flow per dollar invested (cap rate) is lower. They might be a little bit easier to manage but not sure that is a big enough reason to take a much lower cap rate. Based on my research I can easily get a 10% cap rate on a SFR, however an apartment building is usually only 5-6% in the same area. For this analysis assume 100% cash. All of these investments are not local to me. Thanks in advance for your feedback.