low cap Class A market Or high cap and high projected IRR for C class market?

[Jay Ben]

which would you pick? I'm starting to think the best way to build future wealth is investing in better markets at Lower short term yields and high appreciation (nyc, LA etc..) Rather than aiming for deals showing 20 plus IRR.

What are some of your strategies for investing in Low cap markets?

[Dan H.]

Quote from @Jay Ben:

which would you pick? I'm starting to think the best way to build future wealth is investing in better markets at Lower short term yields and high appreciation (nyc, LA etc..) Rather than aiming for deals showing 20 plus IRR.

What are some of your strategies for investing in Low cap markets?

My opinion is that the real estate market is efficient.  Market price and therefore cap rate is based on numerous criteria including expected appreciation, expected risk, and expected rent growth.  If you share this belief, the high cap rate markets have a high cap rate in part because their appreciation outlook and rent growth outlook are not near what is expected of the lower ap rate markets.

In general the high cap rate market will have better initial cash flow.  With time, the lower cap rate market typically achieves better cash flow and has experienced the better appreciation.

Note that LL friendliness is one of the numerous items that get reflected in the cap rate.  A market that has low cap rate that has overcome the drag from being LL unfriendly has typically done so because of its growth rate is expected to be exceptional.  However, the LL friendliness is just one criteria.  A low cap rate in a LL friendly market likely has that low cap rate because it also is expected to see significant appreciation and/or rent growth.  My point is that growth can be expected and achieved in both LL friendly and LL unfriendly markets.  If the area in not local to you, you might as well chose a LL friendly market (but I always recommend examining your home market before looking elsewhere).

 Good luck