What is the Relationship Between Cap Rate and Neighborhood?

What is the Relationship Between Cap Rate and Neighborhood?

It is the norm to find higher cap rates (on paper) in worse properties/areas. These properties are often more problematic and management intensive. They can be good investments, especially with good turnaround strategy and execution. I think that would be very difficult from a long distance.

I’m looking at class C multi-family properties with hair on them, but I’d plan to be on site nearly daily during the turnaround.

This is a very normal question.

Here’s the thing….

Higher cap rate deals are typically perceived as being high risk, which means that when you invest in a high risk deal, you want your money to come back to you faster to reduce your exposure, right?

The faster you get your money out of the deal, the better off you will be.

My experience with high cap rate deals such as you’re describing is that you’ll “earn” your return.

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