What I love most about this business are the interesting people I meet. I got a call the other day from a gentleman wanting to invest in the area, whose primary criteria was $3000 a month cash flow. So how on Earth do you accomplish THAT here? This required some investigation.
I hopped onto Loopnet to see what I could find. (For those of you who don’t know, Loopnet is THE premier internet site for commercial investment property across the US. Oftentimes I’ll find Reno/Sparks properties on there that aren’t even listed on our local MLS.) But I digress…
Pretty much, to get that kind of income, expect to pay $600K-$750K for a six to ten unit building, all cash. Or you could leverage that $600K into a $1.8 million apartment complex for roughly the same return after financing. Rents in the area generally run 70-80 cents per square foot. Our cap rates are running at a lowly 5-6%, and as high as 8% if you’re willing to purchase a mobile home park (btw, an absolutely excellent investment because they are like little monopolies of affordable housing close to town).
Why the low cap rate? Because appreciation potential is significant. If you can hold onto these properties for at least five years, it’s likely you’ll see some serious gain. But if what you really want is that proverbial 10% cap rate? Let me introduce you to my colleagues in Kansas City, KS.