Accountant · Ferndale, WA · Member since 2016 · 26 posts · 12 votes
Hello BP, I'm new to investing in real estate, but have taken the time to educate myself somewhat. I've been looking at mostly two to four unit properties in our area and crunching some numbers and wondering if I am arriving at reasonable conclusions. It looks like a 8 - 10% cap rate and a 1% Price/Rent ratio may be decent targets for small multi-family properties in the Bellingham, WA area. I'll be interested to hear what other investors have to say. Thank you ahead of time for your responses.
Rental Property Investor · Everson, WA · Member since 2016 · 11 posts · 1 vote
9y
Hi David! Welcome to BP! This is a great place to continue to educate yourself. I'm fairly new to the 'shopping' side of real estate, but in shopping for single family and small multi family for the last six or so months, I've found those numbers pretty unrealistic in Bellingham. I've seen most things going (and going quickly) at around a 5% cap rate, if not lower. I've not seen any markets in Whatcom county that follow the 1% rule either. My advice would be, if you find anything with those numbers, jump on it, it won't last long.
Accountant · Ferndale, WA · Member since 2016 · 26 posts · 12 votes
9y
Thanks Angela, I'm thinking the numbers I arrived at are close to the top end as well. When you read about all of these rules of thumb 1 percent rule or two percent rule (we wish right?) and then do some research, things look a little different.
Ann Arbor, MI · Member since 2014 · 1k+ posts · 997 votes
9y
Hi David,
I'm a realtor in Bellingham and I work with investors only. For your standard turnkey property in Bellingham, cap rates will be between 4% and 5%. I should stress, this is for turnkey. If the property needs a lot of work or has a lot of tenant issues, your cap rate will be higher. It follows the old adage that the greater the risk, the greater the return. I would seriously doubt the viability of any property in Bellingham stating a cap rate greater than 8%. Anyone selling that is using fuzzy math.
There are some properties that meet the 1% price over rent ratio but they are very few and far between and normally qualify as tear downs. I have been to 10 properties in the past six months that qualified for the 1% price/rent ratio and they have all been absolutely disgusting.
Having said all of this, there can be opportunities to invest in mobile home parks that provide verifiable rates of return above 7%.