@Alicia Rivera Both properties are in the Berkshires- Adams and North Adams. To be honest, although I am glad I have them now, Massachusetts isn't a great place to invest. It is as anti landlord as a State could possibly be. It was a rough journey at first and I'm thankful I have great tenants now. I literally just got a call yesterday from a buyer and may be selling them. If this works out I'll be beyond elated.

@Martin Guinn Thanks! I hope your investment journey is going well 🙂

@Devin Sikiric Good questions! With the properties you found that had low cap rates - did you check comps? Was it priced correctly? Was it priced correctly yet the owner failed to raise rents to match the market rate? I see it all the time now where owners are asking for top dollar yet their rents are hundreds of dollars below market rents. When a property is low risk it means it‘s a safer property- newer, won’t need repairs, a roof or major appliance replacement for a long time. When you buy new construction it will typically have higher price relative to income. Higher cap rates are typically value add, secondary market, older, and in need of updates. It’s a riskier investment and less stable. When appraising residential properties (1-4 units) appraisers will use sold comparable properties to determine value. Investors and commercial appraisers use cap rates and even the income approach when determining value.

@Devin Sikiric Yes sir! You are correct! In this specific scenario you are not creating more risk by improving the property and increasing cash flow. That is the ultimate goal. What you did: through improvements or renovations, you increased the value of your property. You raised rents because the units were nicer, which increased your NOI = a higher cap rate. In your case, the increase in cap rate is because of higher cash flow- that is not risk. Your NOI went up because more cash is coming in. Bravo- keep killing it! Now, let’s pretend you renovated, raised rents, NOI increased, and your cap rate went up because of more cash flow... and then the market dips causing you to lose property value. I’m going to use numbers for this one- Let’s assume your original purchase price is $500,000, NOI is $50K, giving you a cap rate of 10%. **The market dips-** Now your home is worth $400,000, NOI is still $50,000, giving you a new cap rate of 12.5%. The moral of the story- look at all of the numbers and keep asking questions :)

Congrats! How many more rooms can you add?