What is a good real estate return on investment for Bakersfield, CA?
So what kind of return can we expect on a multi-family property these days? Well it totally depends on the are for sure.
Let’s look at Bakersfield right now though and let’s look at cap rate, which is the return of the net income as a ratio to the sale price. So that number, obviously the higher the better. So right now the cap rate, you can expect for say, a fourplex, in a better area of Bakersfield can be in the 4-5% range, if people that put in the expenses did it accurately.
Lesser areas, maybe more like a C area of town that can jump up to 5,6, or 7% cap rate. Better return. But I’ll tell you this. Those sound low when you consider all the complications of running a multi-family property.
I’ll tell you this, the rent have jumped up so much in the last 12-18 months that there’s an opportunity there for the smart investor who buys maybe a higher price, lower cap rate than he’s having to pay in order to get the property because it’s a competitive market right now.
He’s going in and he’s going to do some rehab, he’s going to do some repositioning of the building, how it comes on the market, as rentals. He’s going to rent to a little higher level of tenant.
Those kind of moves can increase the value of your price, strictly by the things that he did, by 20-30% in the first year or two, no question. Sometimes more, I’ve seen it happen quite a bit, a higher percentage than that in less than a year. So I know it’s possible.
There are a lot of strategies, it’s tricky. But work with an expert, work with a professional that knows how to do rent increases and changes on rent structures.