Investing in Rental Houses vs. Apartments
According to Zelman & Associates the Cap Rates for Class-A apartments has dropped slightly to 4.6% and class-B apartments to 4.9%. And other influences, such as low interest rates and more development of new complexes on the horizon suggest Cap Rates may be compressed even further. When these owners decide to sell the value of the property will be a function of Cap Rate and NOI.
Lately most of the rental house deals we have brokered have been with Cap Rates of 6% or higher. There is the additional benefit that, when the landlord sells the rental house, if the house is in a good area, they get to sell for full retail to an owner-occupant buyer. If you have the option of buying an apartment complex then you have the option of buying several rental houses which adds the benefit of diversifying by buying in a variety of areas to reduce risk.
Conclusion – rental houses can offer better cash flow, better appreciation, and reduced financial risk.
Buy your next rental house through Excalibur Homes and your first leasing fee is FREE.