Low cap rate... why bother?

[Chirag Parikh]

Hi All!

I've been browsing loopnet and other websites recently to get a general idea of what kind of multifamily investments are out there. I noticed that in some places (los angeles for example) have multifamily apartments for sale with VERY low cap rates (2-3%) and I was curious to know if there is any advantage at all to these? I have read that low cap rates usually indicate a lower risk and possibly higher quality tenants. 

ROI would be poor regardless though wouldn't it? Do low cap rate investments make sense if the volume (# of units) is high? I'm curious to know if anyone has any thoughts on this. Why would anyone bother to advertise apartment complexes for sale with such low cap rates?