In multifamily real estate investing, there’s a simple truth: some cities are just better than others. Whether it’s the appeal of booming job markets, the promise of steady rental growth, or the vibrancy of cultural diversity, each location holds its unique appeal.
This article will explore 10 such cities and highlight why they stand out as top picks for savvy multifamily investors.
Best Places for Multifamily Real Estate Investing
Now for the good part: 10 of the best places for multifamily real estate investing. Let’s begin.
Charlotte, North Carolina
Charlotte, North Carolina, is rapidly becoming a go-to destination for multifamily real estate investors. In 2022, the city outshined the national average with an impressive 8.1% rent growth, offering more affordable average rents at $1,610 compared to the U.S. average of $1,719. The job market is booming, especially in financial services, contributing to a 4.9% employment growth and adding 73,900 jobs.
Furthermore, construction is hot, with around 27,000 units in progress and 6,337 completed in 2022 alone. Charlotte’s transaction volume in 2022 also ranked as one of the best in a decade, signaling a vibrant investment environment. Events like the 2023 Multifamily Investor Nation Convention also turn the city into a networking hub for savvy investors.
Orange County, California
Orange County in California stands out in the multifamily investment realm with its exceptionally low vacancy rate of 4.3%, placing it among the top 5 in the U.S. It’s also one of the priciest, with average rents at $2,610 per month, and Class A properties reaching an average of $3,180. The construction sector is active, as evidenced by the 16 properties and 5,570 units currently being developed.
At the same time, the past year’s sales volume hit an impressive $1.6 billion, outdoing the national average. The market’s allure is its strong demand and historic rent growth, attracting a mix of national and local investors. Despite some market challenges, Orange County’s demographic trends hint at a promising future for property values.
Atlanta, Georgia, shines as a leading market for multifamily real estate, ranking second in 2023 according to the comprehensive CONTI Index. Its appeal lies in a dynamic mix of young adults, growing by 2.3% or 10,400 people in 2022, signaling strong rental demand.
Further fueling this growth is a business-friendly environment, drawing major employers and contributing to a 4.8% job growth, with 138,200 jobs added in just a year. The presence of top universities and tech giants adds to its allure, as does its quality of life and fiscal health.
New York City, New York
New York City stands as a powerhouse in multifamily real estate investing. Its historically low vacancy rates and 2.3% rental price growth in the past year, double the national average, highlight a robust market.
Moreover, despite its high living costs, the city’s strong job market and significant construction activity, with 21,000 units recently completed and 66,000 under construction, keep attracting renters. The market’s strong fundamentals and the lower risk of multifamily investments make New York an attractive option for investors.
Houston, Texas, shines in multifamily real estate thanks to its cultural diversity and growing population. These factors create a steady demand for housing. Jobs, buoyed by Texas’ strong economy, further boost this demand.
At the same time, Houston stands out as a top multifamily investment market due to the substantial cost difference between owning and renting. In Q3 2022, buying a home was 57% pricier than renting, making apartments the go-to choice for many. With a substantial number of units underway nationwide – 450,000 out of 796,000 set for completion in 2023 – Houston is ready to cater to this growing demand.
In Seattle, Washington, the multifamily real estate sector reveals a fascinating dynamic for investors. The city is seeing a rise in vacancy rates, offering more investment opportunities. In contrast, rental rates continue to climb, indicating the potential for increased revenue. An increasing unemployment rate adds another wrinkle and could unexpectedly boost demand for rental housing.
Simultaneously, reducing new construction activities and signaling less competition in the market complement these trends. Pivotal legislative changes mark 2023, reshaping the investment framework in Seattle. The market’s promising numbers, with average rents at $1,903, average unit prices at $294,807, cap rates around 5.0%, and a net absorption rate of 3,257, make Seattle an attractive and stable destination for multifamily real estate investment.
Nashville, Tennessee, stands out in the multifamily real estate market, ranking third nationally according to CoStar. The city saw its population grow by 36,000 from July 2021 to 2022 and recorded a net absorption of 5,000 units, albeit below the average of 12,000. Despite a 20-year peak vacancy rate of 10.8%, the city is set for further expansion, anticipating over 55% population growth by 2060.
While the city’s rental market is growing modestly, under 2% as of early 2023, the sales volume is robust, hitting $4.3 billion. This figure is also significantly higher than the historical average of $1.2 billion. These factors firmly place Nashville as a top multifamily investment destination, ranking third nationally.
In Tampa, Florida, the multifamily real estate market is thriving, marked by a strong job market and rising rents, leading to a 97.9% occupancy rate in 2022. As part of Florida’s rapid growth, Tampa has seen over 25,000 multifamily units delivered since 2018. Currently, in Q3 2023, there are 16,340 units under construction, with Downtown Tampa spearheading this growth through projects like Brandon Town Center and MAA Breakwater.
However, Tampa’s multifamily market also faces challenges. With 11,324 units expected to be completed this year, against a modest job growth rate of 1.4%, there’s a looming concern of an oversupply of about 7,100 units. This potential glut in the market suggests that investors should adopt a measured approach, carefully weighing Tampa’s dynamic growth opportunities against the risks of short-term oversupply.
Denver, Colorado, is making a name for itself in the multifamily real estate investment sphere for 2023. High demand is evident from the $5.8 billion sales volume seen over the past year. A major construction boom is also underway, with a significant building pipeline of 26,000 units currently being developed, resulting in a 9.5% increase in inventory.
Moreover, the city has an average rent of $1,779/month, and as per a new policy from July 2022, 8 to 15 percent of units in new projects must be affordable housing. Despite a vacancy rate of 7.7%, projected to reach 9% before stabilizing by 2024, investor interest remains strong in Denver’s multifamily market.
Salt Lake City, Utah
Rounding out the list of the best places to invest in multifamily real estate is Salt Lake City, Utah. With a regional population of 1.2 million, median household income of $80,196, per capita income of $34,445, you have a strong demographic that’s not going anywhere. In the multifamily sector, cap rates have also increased from 4.63% to 5.07% from Q3 2022 to Q3 2023.
As of September 2023, Utah’s housing market is experiencing fewer new, pending, and closed sales, though the median sales price remains stable and the average sales price is rising. With properties staying on the market longer and a shrinking inventory, the area is projected to see a 2.4% increase in home values by September 30, 2024 and consistent investor interest.
Importance of Choosing the Right Location for Multifamily Real Estate Investing
Selecting a strategic location can mean the difference between a flourishing multifamily investment and a stagnant one. Let’s explore why location is so crucial.
Lower Rate of Vacancies
Properties in prime locations often enjoy lower vacancy rates because they are close to essential amenities like public transportation, shopping centers, schools, and hospitals. In areas where renters can easily access these facilities, the demand for rental units tends to be higher. Consequently, data-driven real estate analysis reveals that properties with easy access to such amenities consistently achieve higher occupancy rates than those in less convenient locations.
Faster Rent Growth
Properties in desirable locations typically enjoy faster rent growth, driven by the area’s overall appeal. Economic development, employment opportunities, and neighborhood charm significantly influence this desirability. Historically, such areas have consistently seen a steady rise in rental prices, making them increasingly lucrative for investors over time.
Choosing the right location can also impact the quality of your tenants. Properties in safer, well-maintained neighborhoods tend to attract tenants who are responsible and stable. These tenants are more likely to take care of the property, pay rent on time, and stay longer, reducing turnover costs and the hassle of finding new renters.
Low Maintenance Cost
A property in a good location often incurs lower maintenance costs, partly because such properties are usually in areas with better infrastructure and higher construction standards. Additionally, in well-developed areas, finding reliable contractors and maintenance services is often easier, which can lead to more competitive pricing and better-quality work.
Investing in a prime location provides opportunities to build relationships with reliable partners, such as property management companies, real estate agents, and contractors knowledgeable about the area. Working with trustworthy and experienced partners can greatly reduce the challenges of property management and significantly contribute to the success of an investment.
Get in touch with RSN Property Group now and discover how our multifamily real estate investment opportunities can assist you in accomplishing your investment objectives. Collaborate with us to establish a thriving future for your property portfolio.
From Charlotte to Salt Lake City, we’ve explored ten top destinations in multifamily real estate investing, each offering unique advantages from vibrant job markets to resilient rental growth, and cultural diversity to stable market dynamics. These insights provide a guide for investors seeking to capitalize on the varied characteristics of multifamily properties. In the end, grasping and utilizing these diverse urban attributes is key to making informed and strategic investment choices in the dynamic world of real estate. Happy investing.
Frequently Asked Questions (FAQs)
Location is crucial because it directly impacts the property’s vacancy rates, rent growth, and tenant quality. Properties in desirable locations, near amenities like public transportation and shopping centers, tend to attract more tenants, experience faster rent growth, and attract responsible, long-term renters.
Properties in sought-after areas usually experience faster rent growth due to factors like economic development, employment opportunities, and neighborhood appeal. These areas typically see a consistent increase in rental prices over time, making them more attractive to investors seeking higher returns.
Investing in high-demand areas often leads to lower vacancy rates and higher occupancy rates, as these areas are usually well-connected to essential amenities and employment opportunities. This can result in steadier income streams and potentially higher property values over time.
Properties in prime locations often incur lower maintenance costs as they are usually in areas with better infrastructure and higher construction standards. Also, it’s generally easier to find competitive and reliable maintenance services in well-developed areas.
Yes, investing in a prime location can open up opportunities to forge relationships with reliable and experienced property management companies, real estate agents, and contractors familiar with the area. These partnerships can ease the burden of property management and contribute significantly to the investment’s success.
Reed Goossens is an Australian-born real estate entrepreneur, investor, author, public speaker, and an all-around good bloke. Reed got his start in real estate investing back in 2012 when he moved to the US.