Generally speaking, Boston’s suburbs have some of the best cap rates among all Boston neighborhoods. Median sale prices tend to be much lower in the outskirts of the city, as they have skyrocketed in the city’s core neighborhoods over the past decade. That being said, some of Boston’s suburbs are every bit as expensive as some of the city’s premium real estate markets.
These suburbs in particular,do not yield the highest cap rates on average. In our cap rate calculation, we take the average rent price times twelve to project yearly revenue. We use the median sales price for each property type as the cap rate denominator.
Brookline
Median sales prices for Brookline real estate have always been among the highest in Boston. It’s widely considered the nicest suburb of Boston, and it has the 4th highest single family median sale price out of all neighborhoods in the metro area, not just the suburbs. As a result, cap rates are very low on average in Brookline. Among suburbs only, it ranks as the lowest average cap rate for single family properties (1.50%), second lowest for condos (3.47%), and lowest average cap rate for multi family homes (3.29%). Even if the city’s neighborhoods were included in the rankings, Brookline would rank as the 4th lowest single family cap rate, 8th lowest condo cap rate, and 6th lowest multi family cap rate.
Cambridge
Not far behind Brookline in terms of median sales prices, Cambridge real estate is every bit as expensive as it is in Back Bay and South End. Cambridge has the 2nd lowest single family cap rate among suburbs (1.77%), 4th lowest condo cap rate (3.65%), and 2nd lowest multi family cap rate (3.77%).
Newton
It’s no secret that Newton real estate is more expensive than most of metro Boston. Newton is known for its big sprawling properties and also its larger than life price tags for real estate. Among all suburbs in metro Boston, it ranks as the 3rd lowest for average single family cap rate (1.82%). Newton condos rank as the lowest average cap rate in outer Boston (3.25%), while multi-family homes in Newton rank as the 6th lowest (5.20%).
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