Question Details

Ron Deutsch,  in Los Angeles, CA

Are there any good areas with high average cap rates out there?

Asked by Ron Deutsch, Los Angeles, CA Sun Sep 23, 2007

Are there any good areas with high average cap rates out there? I'm thinking about investing out of my area. A 5% cap rate in West Los Angeles would be an incredible deal.

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In Las Vegas and have several high cap rates of 15% up to about 40% all GRM below 8 and expenses below 35%
0 votes Thank Flag Link Tue Dec 14, 2010
To answer your question, high cap rates are not in California. You've got to look out of state. Try Houston Texas. Cap rates are around 7 and 8% in multi family class A buildings. Thats a damn good return on your money. Class B's and C's are higher, but more headaches.
0 votes Thank Flag Link Wed Jun 10, 2009
I'm aware of the inverse relationship. That's why I asked the question that way. In other words, is there anywhere out there where you can get into a good area with a better than 5% cap? I'm guessing that the answer is yes, but I need your help to tell me where.
0 votes Thank Flag Link Sun Sep 23, 2007
Cap rate should be highest where the risk is highest -. If considered philosophically.

If you have a very low risk such as FDIC insured savings account, you should expect a low return or cap rate but feel secure {relatively} about the safety of your principal. Cap rates are similar to interest rates in that respect. Properties that are perceived to be stable and Class "A" are in demand. If you seek a high cap rate seek areas and properties types that are deemed to be "dogs" by popular opinion.

The term good area and the term high average cap rate are inversely correlated. If you want a "good area" {in popularity} you are also seeking a lower than average cap rate.

If you want an area with High average cap rates look for areas that are depressed economically with high crime rates, graffitti and poor infrastructure.
0 votes Thank Flag Link Sun Sep 23, 2007
Jim Walker, Real Estate Pro in Roseville, CA
Okay, let me add: Where are they?
Web Reference:
0 votes Thank Flag Link Sun Sep 23, 2007
Thhere are. Sometimes you have to look outside the bat area to find them but you have to be open to that.

You have to look at the deal not the cap rate.

Look outside the box. Look for the proeprties that are undermanaged.

This is where youwant to center your focus.
0 votes Thank Flag Link Sun Sep 23, 2007
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