If you’re a property investor in Boston, you’re probably aware that cap rates have been super low in the core neighborhoods of the city. Prices for Boston real estate have skyrocketed to absurdity, making it difficult to find profitable investments in the city’s core neighborhoods. Right now, the suburbs are carrying the best average cap rates in the Boston metropolitan area without question. In fact, the top 10 best metro neighborhoods by average cap rate are all located outside of Boston proper.
In order to calculate the average cap rate for a neighborhood, we’re projecting yearly revenue based on the current average rent price in that area multiplied by twelve. We’re using the median sale price for each area and property type as the cap rate denominator.
Based on this math, we can get a rough estimate of what an average cap rate would look like for a neighborhood. Here are the top 4 neighborhoods by average cap rate in Metro Boston:
Chelsea currently ranks #1 for all 3 property types (single family, condo, and multifamily) in terms of average cap rate. This is predominantly because it also boasts some of the lowest median sales prices in the metro area. With a median price of $489K for single family homes for sale in Chelsea, it’s the only metro neighborhood with a cap rate above 5% out of all areas for that category. It also has the highest cap rate for condos (6.42%) and multi family homes (6.74%).
Similar to Chelsea, Revere real estate is among the most affordable out of all neighborhoods in metro Boston. As a result, cap rates are higher here on average. Revere ranks as the 2nd highest single family cap rate in Boston (4.63%), the 4th highest condo cap rate (6.09%), and it ties Chelsea for the highest multifamily cap rate at 6.74%.
Malden is another neighborhood posting high cap rates for all property sizes across the board. It ranks 4th for average single family cap rate (4.06%), while Malden condos rank 3rd highest for average condo cap rate (6.10%). Malden also has the 6th highest multi family cap rate (5.98%).
Quincy’s housing market has been one of the fastest growing throughout the pandemic, and the price of Quincy real estate is on the rise. At the moment, prices are still reasonable in this close suburb just south of Boston. Quincy ranks as the 3rd best single family cap rate (4.16%), 5th best condo cap rate (5.55%), and 5th best multi family cap rate (6.37%).