Can't find higher than 4% ROI on residential multifamily in OC

[Kimberly Ashley]

Hey guys, I wanted to get some feedback from the Orange County community in SoCal where I'm looking for a multifamily deal. Whenever doing searches for listed properties, I seem to come up with 4-4.5 % at best for ROI. I'd like to ask investors familiar with this market if that limitation is generally true for this area or if they routinely come across better deals than that. Thus far I've been searching properties on Loopnet and Zillow.

[Joel Owens]

Most of my CA clients are buying in other states. Either large apartment buildings for millions and above in price or commercial retail properties.

Multifamily out of state to get mostly passive you really need about a 6 million price point and above. 100 doors at 60k a door for a semi-good area. With commercial retail you can get passive at the 1.5 million dollar level.

Small balance multifamily in CA you get a bunch of foreign investors from overseas who are getting negative, zero, or 1 to 2% returns in the countries they live. They tend to have economic and civil unrest so long term investors like America. Our worst times is still better than many countries best of time in comparison to economy and other metrics. Some of them can get fast track visas for owning property here. The foreign investment has tapered off some for volume but it is still there. Canadians with their exchange rates on currency have cooled off some buying in the U.S. but other countries have heated up investing here.

Lot of people in CA are willing to pay low caps because simply they do not need the money. My average client in CA makes anywhere between 300k and 1 million a year income or more and has net worth 7 figures to 8 figures. They figure over time rents will keep going up blending the cap rate and return up and appreciation will happen. If you are looking to live off of or subsidize your income from job or business that is much tougher to do in CA in a lot of areas. Have seen some 6 to 7 caps on commercial retail in great areas but these are 7 to 10 million dollar type of properties. The smaller stuff in 2 to 4 million range like a 5 cap. In other states you can get better cap rates.