Finding Upside in Real Estate’s Downturn

By Ben Steverman - 2011-09-27T18:19:45Z

10 of 15

Hunting in Second-Tier Cities

Christopher Germain based his real estate firm, Piping Rock Partners, in San Francisco, but says there are far too many large investors competing for real estate bargains there and in other big U.S. cities like New York. So instead, Germain is hunting for apartment complexes in places like Columbus, Ohio, and Scranton, Pa. He looks for buildings with fewer than 200 units, priced at less than $20 million--a level that is "below the radar screen" of larger players. Buildings typically offer 8 percent to 10 percent return initially. To get more, "you need to find some means of increasing the rents," such as by renovating apartments, he says.

Photograph by Getty Images