here are the best cap rate rentals in the USA

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here are the best cap rate rentals in the USA

Andrew Urbanski
Investor · Sydney, NSW · Member since 2009 · 9 posts · 3 votes

Im looking at retirement income and want to get the most for my investment on a regular basis without too much work, so Id use a manager. Any suggestions on where I can get 10% cap or better in a reasonable area?

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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
Originally posted by @David Faulkner:

BTW, CAP rate only applies to commercial property (5+ units) ... if anybody is trying to sell you on a 1-4 unit property by telling you what the CAP rate will be, then do yourself a favor and take my advice to run for the hills because that provider either has no clue what they are talking about or is trying to scam you or both. Caveat Emptor my friend.

 Beg to differ. Math is Math and the numbers do not lie.  

The CapRate (NOI / Purchase Price) is always valid. Is it commonly applied to SFRs and 1-4 multis - - no, but the evaluation is STILL CORRECT. Both NOI and Purchase Price are B L I N D as to what kind of property is being evaluate. IMO, hard numbers (those you can verify) are never a scam.

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  • Michael Seeker
    Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
    9y

    This completely depends on your definition of "reasonable area".  That means vastly different things to different people.  By my definition,  the going cap rates for a "reasonable area" in the cities I invest in are in the 6-8% range and these cities generally have higher cap rates than most.  If you post an address of somewhere you would define as "reasonable", you could get a better response as to what you should expect.

    Generally anything above 10% is going to be in a rougher area and/or have significant deferred maintenance in the current investing environment.  Compared to around 2010 where you could get properties in great areas at 10-15% cap rates.  The difference is nobody wanted real estate then and everybody wants it now.

    4Reply
  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Andrew Urbanski I'm with @Michael Seeker as generally cap-rates and inversely related to the quality of the area.  In a higher-quality area you're competing with home buyers (that pay more because of emotion) as well as investors that are willing to make an educated guess that appreciation will be a source of income for them down the road.  Your challenge is "balance" as 10% cap areas are rougher and therefore become less passive even when you use a PM company.  You might also see 10% cap rates on older properties/areas where maintenance is a little underestimate and you're 2 years from needing a new roof.  It doesn't take too much wiggling when it comes to assumptions about vacancy, repairs, or cap-ex allocation to turn a 6% cap into a 10% cap.  

    2Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y

    Careful there mate. As mentioned, there is no free lunch in REI ... if you are getting 10 CAP, even if it is a true 10 CAP and not a 6 CAP where the numbers are fudged to make it look like 10 CAP, then you are taking on significant risk to get there. Quality of NOI & cash flow is every bit as important (I'd argue more important) than quantity. Especially if you are investing from a far through a PM company, stick with quality ... B-A- neighborhoods ... the cash flow will be lower initially (under 10 CAP), but it will be obtainable and hold its value over time as well as infinitely fewer headaches. BTW, CAP rate only applies to commercial property (5+ units) ... if anybody is trying to sell you on a 1-4 unit property by telling you what the CAP rate will be, then do yourself a favor and take my advice to run for the hills because that provider either has no clue what they are talking about or is trying to scam you or both. Caveat Emptor my friend.

    3Reply
  • Andrew Urbanski
    OP
    Investor · Sydney, NSW · Member since 2009 · 9 posts · 3 votes
    9y

    Thank you for your warnings and Im surprised by your responses.

    I have friends who have recently bought condos in Tampa in C class area getting 10% cap. Some cities like Milwaukee IL I can get a higher cap rate but the crime stats put me off. What about Rochester NY which has a higher rental return?

    Is there a better way to make money in property as a 6% cap doesnt attract me.

    0Reply
  • Steve SantacrocePro Member
    Rochester, NY · Member since 2013 · 101 posts · 48 votes
    9y

    Rochester is no different than any other city. The larger returns are in rougher neighborhoods.

    1Reply
  • Andrew Acuna
    Investor · Mission, TX · Member since 2017 · 220 posts · 135 votes
    9y
    Mission, TX- if you know where and what to buy you can get A-B neighborhoods with a 10+ cap.
    0Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @David Faulkner:

    BTW, CAP rate only applies to commercial property (5+ units) ... if anybody is trying to sell you on a 1-4 unit property by telling you what the CAP rate will be, then do yourself a favor and take my advice to run for the hills because that provider either has no clue what they are talking about or is trying to scam you or both. Caveat Emptor my friend.

     Beg to differ. Math is Math and the numbers do not lie.  

    The CapRate (NOI / Purchase Price) is always valid. Is it commonly applied to SFRs and 1-4 multis - - no, but the evaluation is STILL CORRECT. Both NOI and Purchase Price are B L I N D as to what kind of property is being evaluate. IMO, hard numbers (those you can verify) are never a scam.

    8Reply
  • Andrew Urbanski
    OP
    Investor · Sydney, NSW · Member since 2009 · 9 posts · 3 votes
    9y

    what is an lMO? I usually check all the figures so double check the cap rate calculation.

    thanks

    0Reply
  • Priyanshu AdathakkarPro Member
    Realtor · Columbus, OH · Member since 2017 · 313 posts · 245 votes
    9y

    From an investment point of view, CAP rates are relative to the market. What is more important is cash on cash. If you have $10 to invest, what kind of good stabilized property can you buy to give you a steady, say 7.5% CAP rate? I've seen properties that were 10 CAP when sold but went down to 4 CAP in a few months because most tenants were month-to-month and they left one-by-one! What you need to look at is whether the property is stabilized and whether there are long term tenants in an industrial/business market or established (waiting list) property in a transient (like a college town) market. What you need to look at is for every 10 dollars you invest how many dollars are you going to get back every year.

    2Reply
  • David Faulkner
    Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Jeff B.:
    Originally posted by @David Faulkner:

    BTW, CAP rate only applies to commercial property (5+ units) ... if anybody is trying to sell you on a 1-4 unit property by telling you what the CAP rate will be, then do yourself a favor and take my advice to run for the hills because that provider either has no clue what they are talking about or is trying to scam you or both. Caveat Emptor my friend.

     Beg to differ. Math is Math and the numbers do not lie.  

    The CapRate (NOI / Purchase Price) is always valid. Is it commonly applied to SFRs and 1-4 multis - - no, but the evaluation is STILL CORRECT. Both NOI and Purchase Price are B L I N D as to what kind of property is being evaluate. IMO, hard numbers (those you can verify) are never a scam.

    Show me a valid CAP rate comp for a SFR.

    1Reply
  • Kate Stephens
    Rental Property Investor · Ventura, CA · Member since 2016 · 62 posts · 34 votes
    9y
    Check out holdfolio. They may have he solution that you are looking for especially for an overseas investor. @ larry fried has some experience with them and speaks highly of them. I like their model - shared equity and cash flow. Larry has written a post on it and I'm sure will be happy to chat with you.
    0Reply
  • Michael Henry
    Real Estate Consultant · Brookfield, WI · Member since 2014 · 873 posts · 350 votes
    9y

    @Andrew Urbanski - The Cap rate (NOI / Purchase Price) is a good tool to determine a value at a given point in time, usually any 12 months. You suppose to take that cap rate and compare it to similar properties in that market. The problem is making sure you are comparing the right properties and making sure you NOI is correct. Many times sellers create a Pro Formas that looks perfect and buyers take the numbers at face value.

    I like looking at Caprate, cash on cash, and debt to income ratio to make sure I'm buying a good deal. If I'm looking at an SF home I'm looking at comps for value. I will run the numbers and see what the cap rate is but not necessary my sole discuss tool. 

    The think Milwaukee, WI a good market but based on what I read on this site it seems that the midwest, in general, looks good. 

    2Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y
    Originally posted by @David Faulkner:
    Originally posted by @Jeff B.:
    Originally posted by @David Faulkner:

    BTW, CAP rate only applies to commercial property (5+ units) ... if anybody is trying to sell you on a 1-4 unit property by telling you what the CAP rate will be, then do yourself a favor and take my advice to run for the hills because that provider either has no clue what they are talking about or is trying to scam you or both. Caveat Emptor my friend.

     Beg to differ. Math is Math and the numbers do not lie.  

    The CapRate (NOI / Purchase Price) is always valid. Is it commonly applied to SFRs and 1-4 multis - - no, but the evaluation is STILL CORRECT. Both NOI and Purchase Price are B L I N D as to what kind of property is being evaluate. IMO, hard numbers (those you can verify) are never a scam.

    Show me a valid CAP rate comp for a SFR.

    It's not about "what the numbers are or even if they are interesting". Whatever the NOI is for the SFR, divide by the Purchase Price and you get the defacto CapRate.

    What is a "valid vs invalid" caprate and who says so?

    4Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Andrew Urbanski:

    Im looking at retirement income and want to get the most for my investment on a regular basis without too much work, so Id use a manager. Any suggestions on where I can get 10% cap or better in a reasonable area?

    Detroit commonly has the highest intial cap rates. Some parts are reasonable perhaps? There are some stable health care facility reits that pay 7.5% if you really prefer 100% hands off. Good luck! 

    0Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    9y

    Highest cap rates will be found with MHC investing. Usually easily managed from a distance and come in a wide range of size and quality. Fortunately for present investors this vehicle scares away most investors.

    Biggest issues getting in is financing.

    Cap rates on a SFH is only a number, home buyers drive the property values. In the case of commercial income properties it is the cap rate that drives the property value. Apples and oranges.

    1Reply
  • Linda LabbePro Member
    Investor · North Bay, Ontario · Member since 2015 · 709 posts · 262 votes
    9y

    Hi all  real cap rates of over 10% are available in Ohio  in areas that are more then reasonable. I live in Ontario   am a 65 year old grandmother and can walk the ares we invest in with no problem day or night. I love the area  . If you invest out of your neighborhood having a great on the ground team is the secret to getting the right area with the right returns

    2Reply
  • Jason V.
    Investor · Rochester, NY · Member since 2016 · 477 posts · 426 votes
    9y

    Argue about Cap rates all day long, but the metric still means exactly the same thing for SFRs as is it does for commercial MF. 

    BUT: The primary driver of market price for an SFR has NOTHING to do with its Cap rate, whereas it has a lot to do with the market price for MF.

    Yes, the argument could be made that there is a correlation between SFR value and Cap Rate, but no Husband, Wife, and 2.3 kids are driving around the neighborhood looking at houses for sale, and saying "Wow honey, doesn't that house have a great cap rate!?" Residential buyers just don't care, and they set the market price for SFRs.

    6Reply
  • Scott Hamilton
    Investor · Marysville, OH · Member since 2017 · 39 posts · 12 votes
    9y

    @Linda Labbe, curious what areas of Ohio you are referring to. I happen to be in Ontario this weekend visiting friends and noticed your post about my home state of Ohio.

    0Reply
  • Linda LabbePro Member
    Investor · North Bay, Ontario · Member since 2015 · 709 posts · 262 votes
    9y

    hi Scott  I  invest in Toledo  Cleveland area  love them the returns are great

    1Reply
  • David TerbeekPro Member
    Property Manager · Cleveland, OH · Member since 2016 · 260 posts · 162 votes
    9y

    @Linda Labbe is correct.  Cleveland area still have a great rent to price ratio making (real) cap rates in the teens a reality without investing in higher risk areas.

    216-926-2900
    1Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    9y
    Originally posted by @Andrew Urbanski:

    Im looking at retirement income and want to get the most for my investment on a regular basis without too much work, so Id use a manager. Any suggestions on where I can get 10% cap or better in a reasonable area?

    Check out the Midwest

    10% net ROI are falling of trees.

    I personally don't get out of bed for anything less than 15% net when buying to hold for myself

    Thanks

    Podcast Guest on Show #89
    Oz Realty4.5369 Reviews
    WebsiteView Page
    3Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    9y
    Originally posted by @Andrew Urbanski:

    Im looking at retirement income and want to get the most for my investment on a regular basis without too much work, so Id use a manager. Any suggestions on where I can get 10% cap or better in a reasonable area?

    Check out the Midwest

    10% net ROI are falling of trees.

    I personally don't get out of bed for anything less than 15% net when buying to hold for myself

    Thanks

    Podcast Guest on Show #89
    Oz Realty4.5369 Reviews
    WebsiteView Page
    0Reply
  • Andrew Urbanski
    OP
    Investor · Sydney, NSW · Member since 2009 · 9 posts · 3 votes
    9y

    I checked out holdfolio as suggested by Kate and I found the site deceptive,so have you found them to be honest in their dealings with investors?

    Thank you about Cleveland, I have found SFH showing up to 20%.

    0Reply
  • Timothy Murphy III
    Real Estate Broker · Cleveland, OH · Member since 2012 · 771 posts · 252 votes
    9y

    @Andrew Urbanski

    You can get 10% in B caliber suburban areas in the Cleveland, Ohio / northeast Ohio market.

    1Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    9y
    Originally posted by @Andrew Urbanski:

    I checked out holdfolio as suggested by Kate and I found the site deceptive,so have you found them to be honest in their dealings with investors?

    Thank you about Cleveland, I have found SFH showing up to 20%.

     I would say 10% is much more achievable than 20% here in Cle. 

    0Reply
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