Boston Multi Family Cap Rates

Boston’s real estate market for multifamily has exploded over the past decade. Rising rents, increasing enrollment at Universities, and a short supply of properties has sent prices for Boston real estate through the roof. The 1 year multi-family median for the city of Boston is currently $1.02M. That’s enough to make you shake your head if you’re an investor looking to break into Boston’s competitive multi-family market.

Based on this median sales price, we can get a picture of what kind of cap rate Boston is providing investors at these prices. We can project what kind of yearly revenue a multi-family property would yield by multiplying the average rent price in Boston by twelve. We can then divide that into the median price of multi family homes for sale in Boston to get a rough estimate of average cap rates.

The average rent price for Boston apartments is $2,552. That would mean a 2 family property would yield an estimated $5,104/month or $61,248 per year in rental revenue. Divide that into Boston’s median multi-family price of $1.02M, you get a projected cap rate of 5.98% for multi-families in Boston. So despite the sky high multifamily prices, the estimated cap rate is still above the 5% threshold of what investors would consider good.