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Increase Cap Rates in a Smaller Market

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Martina
Increase Cap Rates in a Smaller Market

 

Corridor Funding has been busy over the past few years funding in all of Texas' big MSAs, and we continue to deploy assets into Dallas Fort Worth, Houston, Austin, and San Antonio on a weekly basis. However, we are seeing an exciting pattern of value being purchased and renovated in smaller markets, where our borrowers can refinance into one of Corridor Funding's long-term loans and realize a better cash flow than in larger cities.

 

What are cap rates?

 

The “cap rate” is a statistic that is widely used to compare cash flows, and it is essentially measured by measuring the preceding 12 months' net operating profits by the sales price.

Many buyers are putting their money into markets like Killeen, Belton, and other smaller towns were single-family homes can be rented and renovated for $130,000 to $150,000 and secure renters that are "sticky" because they have children, want the lifestyle that a home provides, and many of the tenants earn a steady income from serving at military bases, private prisons, or retired tenants who are on a fixed income.

 

Where are the highest cap rates?

 

March was a busy month in the Fort Hood, Killeen, and Belton districts, and we have a client with over 20 assets delivering a 13% cap rate, but what our client really loves is the escape funding we bring him into when he buys the houses and cleans them up. In San Angelo, Carrizo Springs, Brownwood, and Lampasas, we have similar clients who are also enjoying double-digit limit rates. We see quality renters signing leases for $900 to $1,200 in these markets, and there is also the potential for duplex and fourplex properties in these markets, where updated quality homes seem to lease-up fast!

 

These towns are fascinating and enjoyable, with a lot of tradition that is mostly preserved and enjoyed. One of my favorites is 200 E Central in Belton, which was designed in 1880 and has been renovated with three upstairs lofts and street-level offices that are ripe for shopping and workplace opportunities.



https://corridorfunding.com/

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