what are Good areas with 7+ Cap rates?

Question

Hey folks, what are some Good areas for Buy & Hold Multi family Investing? Desirable Neighborhood Low crime rate areas. looking for 10% COC

Allan C. · Answer

@Mallikarjun Reddy Pateel return is inversely proportional to risk and effort. Seeking high returns for low effort and risk is low likelihood. You’ll have to define what is more important to you - yield or risk/effort?

Taylor L. · Answer

Cap rate is not the same as return. I would strongly encourage you not to buy solely based on cap rates. Underwrite the properties you evaluate and look at your actual projected returns by implementing your business plan (renovating, raising rents, repositioning, etc)

Scott Swanson · Answer

Mallikarjun,

You didn't mention if you're new to investing or experienced. If you're new, I would highly recommend you stay away from a 10 unit building to start out with. Start with maybe and sfr or possibly a 3 or 4 plex. Get your feet wet. Learn the in's and out's of being a landlord. Get some experience first. Allan C's post is very valid. Maybe ask yourself, exactly what is most important to you? Is it monthly return? Is it appreciation? What is your end goal with buying a multi unit? Do you have cash reserves, in case something major happens? Do you have a solid property manager? Do you have a solid crew to rehab the units? Do you have boots on the ground that you can count on? These are all things you need to seriously consider, before investing.

Upper income areas in or near Chicago, will most likely bring an overall lower monthly rate of return, but the appreciation is most likely there. Middle income areas "typical" rates of return will be a little better and appreciation can be the same or only slightly less. Each area is different. So you need to figure out exactly what you want out of your investment. Northwest Indiana offers some very good deals, compared to Illinois. Taxes are much lower, home prices are less and the potential for solid appreciation is definitely there. There is a migration out of Illinois, into Indiana, because of skyrocketing taxes. So be sure to check property taxes, when considering a purchase. High taxes can kill cashflow, therefore rendering a deal no deal at all!

Remember too, that the more units a building has, the more the rehab will cost. People have a tendency not to take those costs into account. Then there's typically expenses like lawn maintenance, snowplowing, common area electric costs, the water bill and garbage pick up. I hope this helps.

Henry Lazerow · Answer

No where. Theres lots of brokers that will BS you but really A/B will be lower.

Some nicer but not A/B that can get 7 caps… brighton park, areas around midway for 4 units…4 units in mckinley/bridgeport, bronzeville, may get close to a 7 cap but more like high 6s these are B areas.

Henry Lazerow · Answer

What scott says is spot on. Start with a 4 unit its easy to manage and can be on a safe 30 year loan. You can rehab it relatively inexpensive and insurance/trash charges will be way lower. 10 units at lower price ranges are going to be balloon mortgages which can be risky if market cycle falls at refi time. Theres also typically a lot of expenses missing from the small multifamily OM you gotta really dig through with someone who owns them locally.

I like the A/B areas as can rehab and get really high rents/create a bunch of equity. Even though at purchase the cashflow is lower its stable and rarely goes bad like some riskier areas.

John Warren · Answer

@Mallikarjun Reddy Pateel trying to comment on Cook County as a whole is like trying to talk about New Jersey as whole. You have to drill down into the actual areas where you want to invest to see what makes sense. I suspect that you may be looking at areas that are a bit rougher in order to find returns. Chicago multifamily is mostly trading in the 5-6.5 cap range with the occasional "7 cap" when there is a TON of deferred maintenance. I haven't seen any advertised 8 caps in a long, long time.

Julian Broyles · Answer

@Mallikarjun Reddy Pateel

Somewhere the government doesn't intervene 😂

Brie Schmidt · Answer

@Mallikarjun Reddy Pateel - Where is the property?  We can tell you more about the area then.

Mallikarjun Reddy Pateel · Answer

@John Clarkwhere families prefer to stay, safe to go for a little walk in the nigh time. anything above 10+ units.

any comments on Cook county? identified a Property Looks very good with demographics

John Clark · Answer

Define "desirable." Define "low crime." Define "multi-family" size you want. Tell us your price point. Are you looking to be an out-of-state investor? If you are, how much experience do you have? Chicago (and Illinois in general) is no place for rookies, especially out-of-state rookies. Far better to look at northwest Indiana.

what are Good areas with 7+ Cap rates?

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