Worcester, MA Investors: Is a 3.5% Cap Rate on Cash Purchase Too Good to Be True?

[Maverick Shah]

I’ve come across a few 1–2 bed condos in the Worcester area listed between $190K–$220K. If I buy all cash, I’m seeing about $6K/year in net cash flow — so around a 3.5% cap rate.

I get that 3.5% is below market expectations, but my play here is long-term appreciation. These units are in decent shape, require minimal upfront work, and would be cash-flow positive from day 1.

I’ve identified three such properties already. Am I missing something? HOA fees, taxes, repairs, and vacancy are factored in. It feels a bit too easy — what should I be watching out for?

Would love to hear from others who’ve invested in this submarket or similar setups. What’s the hidden downside I might be overlooking?

[Brian J Allen]

@Maverick Shah as @Nicholas L mentioned CAP rate does not give you the true price of a condo, the comps do, but for your purposes it is a good measure of your return on cash. I do a bunch of investment condos in Worcester for clients and they make sense from a management perspective and a way to dip your toe in the market. I have buyers who were comfortable parking money, getting the return and not dealing with anything. The true measure is often the cash on cash return based on leverage. Good thing condos are inexpensive and allow you to simply park cash. The most important part of worcester is knowing where you are buying. It is a big and diverse city and certain areas have better rents for various reasons. Make sure you know the complex you are buying and the area as well. Additionally in Worcester they sell attached SF homes which rent very well. NO CONDO FEES and typically you can push the plowing and mowing onto the tenants which is good as well. Let me know if you need any help.