Help me understand my marketplace... are these deals?

[Ian Bower]

Hey all, 

I've been looking for my first investment property in my local marketplace (2 hour radius around me) 

Here is what I have been finding for the most part... 

SFR - Low cap rate (3% or so)

Multi-Units - 10% Cap Rate, but poor condition*

Multi-Units - Low CAP rate, tenant occupied*

I understand my options for fixing things up at a property, but here are the issues I am running into.. 

*Tenant occupied properties usually have below market rent, often VERY below market. If the rent matched market prices it would be a good deal, what should I do here? 

*Tenant occupied properties that need a lot of work - especially when combined with my point above. I can't renovate with a tenant in the property, especially if they are paying below market rent.

I DO find some properties that are in good shape, even tenant occupied that have a low cap rate - or SFR that have a low CAP rate - Should I be considering these properties?

So I guess overall, my question is can you help me align my expectations with what I am finding, is this a case of "yeah, the market is weird right now, this is typical, you have to make a decision" or... "Look harder/Look differently"

Thanks!

FYI I think that low CAP rate is sub 5%, please correct me if I am nuts.

[Rick Pozos]

It's kinda the way things work. Low cap rates because you dont have to do anything, just collect the 4% or 5% like a CD at the bank.

10% Properties are going to be more involved. Get rid of crappy tenants that have been there for 20 years and still paying $500 per month instead of $1500, but it's a $hit hole. These will take some cash to get up and running.

Maybe look for properties that are a little higher cap rate AND might have some room for rent increases or ADUs or some other way to boost income. THAT is how you are going to get a great deal. YOU have to find ways to increase the value of the property.

You have to look at plenty of properties and find the one that will work for you. If 4% does not work for you, go on to the next one. You just have not found the right property.

AND YES, some people just ask crazy stupid prices hoping that someone will pay for it. Keep walking.