Indianapolis - can lower CAP rate actually be better?

[Ming Zhao]

Hi,

I'm new to BiggerPocket and glad to find this community.  Me and my husband purchased several rentals in San Diego but new to out-of-state investing.  We are currently looking for out-of-state properties to get better cash flow, specifically in Indianapolis area.

Seems like we can go 2 routes:

- Go with higher CAP rates (10%+) w/ older homes (1960 or older), just OK area, and usually not so good schools.

- Go with lower CAP rates (around 8%) w/ newer homes and excellent area w/ low crime and good schools. Greenwood is one example area that we are looking at.

At the end, I'm looking at the ROI - in 5 years which route will give me better ROI (including real estate appreciation).

Any advice on which route we should go with?

Thanks in advance.

[Account Closed]

Go to Arizona, New Mexico or Texas. I bought Commercial Real estate in NM, 9.7% Cap with a 5year net lease to a Taco Bell, pretty reliable tenants for less money then you think, and also got a 13% cap Multifamily 25 units ,I have had interest partnership for 4 years in a semi-run down neighborhood in San Antonio, and almost always has been on time. but if you want to build equity and watch your property appreciate I would stay in SD.