Quote:
Originally Posted by dchan
When I was doing property searches for the real estate developer I worked for 7 years ago, a decent cap rate in an average NYC neighborhood was closer to 5%. I did a rough calculation by dividing the asking price by the building's annual total rent revenue. Not sure if that's the correct way to calculate cap rate.
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The cap rates have always been higher in second and third-tier markets. That's why institutional money flooded the Midwest for the first time ever in the late 2010s. Jared Kushner (yeah, that guy) bought a 50-unit building in the neighborhood I grew up in.
You could still buy a four-family in my city for $120,000 as recently as 2017, so $30,000 per unit. I worked with a guy whose brother-in-law bought a four-family in Detroit back around 2010 for $800. Two houses on the street where I was renting back then were auctioned out of foreclosure, one for $12,000 and another for $20,000. Those things are both worth around $200,000 now.
I just talked to a guy today who is having to move out of a rented 1-bedroom trailer because the landlord is raising the rent from $1,200 to $1,500. There was a whole push around 2017 to buy trailer parks because the cap rates were ridiculous and now those people are raising the rates to dizzying heights.
Meanwhile, I know another guy who is renting a bedroom in a 2-bedroom trailer on somebody's land in Kentucky for $200. So there are still dirt-cheap places out there if you're willing to put some miles on the vehicle or live next to a rehab place.