7%+ Cap Rate Multifamily East Coast Cities

[Tyler Kastelberg]

Despite the recent sell off in medium to long term interest rates, multifamily cap rates continue to compress along most of the east cost. My California investors like to invest out-of-state in medium to large multifamily properties ($1 million to $10 million acquisitions). In what Tier 2 sub-markets can a 7%+ capitalization rate still be achieved?

[James Kojo]

@Tyler Kastelberg

Did someon say cap-rates? That's my jam! :)

I can actually offer insights via a couple of different studies that I've recently read, but I'l just share the most recent for brevity.

Marcus and Millichap just recently released their 2018 multi-family market forecast. In it, they share this gem:

It shows a roughly inverse correlation between appreciation and cap-rates, which you might expect.

If you're looking for cap-rates, then you'll want an MSA higher on the chart. Appreciation is more to the right. The national average is the orange dot. The magic quadrant then would be the upper-right. My markets are actually in the upper left, because I prefer yield.

Keep in mind, this study doesn't take into account some very important market selection criteria, such as jobs, population growth and landlord/tenant laws, etc. You'll want to further whittle-down the list based on your other selection criteria.

Hope that helps!

James