Atlanta apartment properties carried cap rates of 7.7% in the fourth quarter, and Charlotte had yields of 5.2%, according to Real Capital.
Eyelashes, Makeup
At Invesco, the interest in higher yields is shifting the firm's attention this year to the greater Portland, Ore., market, as well as Denver and the New Jersey suburbs of Philadelphia-all places that didn't even rank this time last year, Kraus says.
Invesco will spend about $4,800 a unit at Orchard Pointe to improve the kitchens, electrical fixtures and other "eyelashes and makeup," according to Kraus. The complex was bought for a cap rate of 6.8%. With the upgrades, Invesco is estimating a five-year unlevered return of 12%, he says. With leverage, the yield may be 19%.
"There are a lot of good properties that the capital hasn't aggressively been chasing," Kraus says. "People are looking and believing that they can underwrite a recovery."