Hey everybody I am new the multi family game and and I am looking at deals right now in Kansas City as there cap rates are still 6-6.5%. Which other cities/states are still prices at similar cap rates? Thanks!

@Benjamin Schwartz Check out northwest Indiana!

This is very easy, you can google it but the answer will be more or less the same.Ohio , Indiana , Alabama , Missouri and MichiganFor cap rate as long as it's cheap enough usually it's well above 6%. You could use loopnet as well.

I recommend the major cities in Ohio: -Columbus, great for appreciation, pp is a bit higher around $220k for multifamily -Cincinnati, has a mix of cash flow and appreciation, average multifamily around $180k -Cleveland, has alot of cashflow potential, average multifam around $140k There are other smaller markets like Dayton, Akron, and Newark, which we are starting to see improve due to huge corporations like Amazon and Intel moving to those areas. Looking for cashflow? Look into Cleveland, its got good cashflow potential with appreciation happening as well. Looking for appreciation come to Columbus, there are still 1% deals, but the more attractive part is the population growth and other economic drivers!

As-is cap rates have little value when looking at value add deals. The real question is risk vs reward and what kind of cash flow you can get depending on your effort. I am seeing most multifamily deals in KC trading at a projected (meaning after fully renovated with appropriate market rents) around a 6-7% cap rate with many deals getting closer to 8%. Hope that helps!

@Benjamin Schwartz there are a lot of markets with high cap rates in the Midwest but you need to look beyond just cap rates. Cap rates are a measure of just cash flow in a single snap shot of time. Real estate wealth comes from not just cash flow but also appreciation, equity through mortgage paydown and depreciation tax benefits over a period of time. High cap rates don't necessarily equate to high total returns. Often times, high cap rates are usually a result of low prices which are not usually the best asset class. To maximize your total returns over a period of time, focus on markets with growing populations, growing jobs, good incomes and modern/diverse economies and industries. There are the markets that have the most appreciation potential and opportunity for rental increases. Personally, I like Indianapolis and Kansas City for that. They are not only affordable but have strong economic and demographic fundamentals. I would certainly have them on my list.

@Benjamin Schwartz I feel like the entire Midwest will have plenty of areas that are over a 6 cap. The main question you should be asking yourself is what market interests you and where do you want to go to asset manage? You are planning to visit from time to time to make sure things are going well right? You will need to be fairly involved in these properties, so I would think in terms of where you can fly to easily. You will need to build broker relationships, contractor relationships, lender relationships, etc. Once you choose a submarket, you can then spend your time focusing on one area where you can find the deals that are 6 caps that can be forced up to 10 caps...

Hi Benjamin. One thing to keep in mind is that cap rates are not constant throughout a city - meaning you will have variation from neighborhood to neighborhood. Typically this will be linked to risk and reward, so as you go from A to B to C to D properties the cap rate should rise accordingly. Cap rates are also linked to the potential for appreciation. So if a property is in an area that is appreciating rapidly you will tend to see lower cap rates. In general, I see cap rates between 4-12%. Also, look for properties that need some work, with a modest rehab budget you may be able to turn an average investment into an excellent investment. Hope this helps!

Definitely loving the discussion, want to point out that cap rates are good when you look at them in context. A 3 cap in Indianapolis is different than a 3 cap in Los Angeles is different than a 3 cap in rural Mississippi :) Look at other factors as well, such as population growth, job growth, income growth. What sort of big catalysts in those regions are there to drive values up? Looking at those factors I would consider areas like Columbus Ohio, Indianapolis, Des Moines, Ft Wayne. A lot of the areas we look at have those factors and we have been able to achieve 30%+ audited IRR exits

@Benjamin Schwartz, you may want to also weigh which cities are growing and are attracting fortune 500 companies with lots of high paying jobs. Keep abreast of what our Billionaire business leaders think (Elon Musk) are planning. I believe most of the upper income earners are more and more going to be living in large, fast improving, growing cities with a bright future, not the American Midwest. Appreciation and rent rate growth are, in my opinion, the true path to wealth.

@Benjamin Schwartz In Multifamily you should not only look at cap rates, there are other factors like NOI, potential rental growth etc. that plays major role in overall performance of the deal. I would highly recommend Houston Texas, as rental income growth and appreciation here are steady. All the best!

Which cities should I be focusing on for an above 6 cap rate.Which cities should I be focusing on for an above 6 cap rate.

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Which cities should I be focusing on for an above 6 cap rate.

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