The advantages of multifamily properties are numerous. These investments are profitable and recession-proof. There will always be a demand for housing, although certain sites are more attractive than others. Early on in their careers, real estate investors understand that location is a crucial determinant of future income flow and appreciation. Investing in multifamily homes in desired locations reduces vacancies and increases rent growth over time. We will discuss top cities, investment opportunities, and what makes a great location for a multifamily building.
Multifamily Properties As Investment
Investments in multifamily residences can generate cash flow and appreciation. Single-family houses offer the same benefits, but multifamily investments are more scalable. You can purchase a 10-unit complex rather than seeking 10 single-family rental properties. In addition to saving money, employing a property manager will save you time and effort.
The importance of the scalability of multifamily investments increases as one pursues larger complexes. Some investors and equity companies purchase multifamily properties with more than 100 units. Through multifamily investment, investors can identify opportunities in the U.S. housing market and obtain considerable exposure. This exposure enables them to profit from the increased rental demand in the most lucrative markets. In addition to protecting your cash flow, multifamily apartments and other real estate investments offer a number of tax benefits.
What Factors Make a City Ideal for Multifamily Investment?
While homeowners seek out the ideal property for their requirements, investors are mostly concerned with the numbers. Their diligence assists them in identifying outstanding cities for multifamily property investment. We’ve listed several characteristics shared by the leading metropolitan regions.
Demand and supply determine the economy. Growing cities aid investors in maintaining occupancy rates close to 100 percent. Everyone needs a place to live, yet urban areas are running out of room to construct new homes. Population expansion raises the demand for each unit, providing investors with greater opportunities to boost rents in the future.
People may appreciate a city, but they will only remain if they can find employment there. Once a person has employment, they often do not consider relocating until a career change or retirement. The sustainability of the city’s expansion is indicated by the influx of new citizens and the addition of employment. A city with a large population and increasing joblessness may become more susceptible to crime. People still need to make a living, and without employment, some turn to steal and other criminal actions. Cities that offer numerous options for new people typically have lower unemployment and crime rates.
Investors are able to estimate the property’s profit margin based on current rent pricing. Some owners of multifamily dwellings did not increase rents rapidly enough, offering an excellent opportunity for a new landlord. Investors should also track the historical trend of rent price fluctuations. Strong rent increase over the previous five years, coupled with robust population and employment growth, predicts future expansion.
Developers give value to a city by constructing new buildings. The city may construct a new park, office complex, or another facility to enhance the city’s appeal. A more attractive city draws more inhabitants. There is a correlation between development and future population expansion and the creation of more employment.
Which U.S. state has the most apartment complexes?
Numerous multifamily dwellings are dispersed throughout the five boroughs of New York City, making it the city with the most multifamily dwellings at present. Although there are numerous properties throughout the state and demand is high in the boroughs, the sky-high prices make it impossible for newcomers to enter the market.
Best Places to Buy Multifamily Investment Properties in 2022
Although New York has more multifamily buildings than any other state, investment prospects in other cities are rated better. Our ranking of the top ten cities includes locations with more growth potential.
- Home value: $515,000
- Home value appreciation: 28.2% YOY growth
- Effective property tax rate: 0.97%
- Rent-to-home value ratio: 4.97%
- Rental vacancy rate: 5.85%
- Rent to income ratio: 28.7%
Numerous snowbirds from the northeast migrate to Florida, and the number of year-round residents in the sunny state has increased. Miami is a desirable location and the second most populous city in Florida, featuring a thriving nightlife, a variety of cultures, and an abundance of entertainment options.
- Home value: $110,000
- Home value appreciation: 6.3% YOY growth
- Effective property tax rate: 2.44%
- Rent-to-home value ratio: 13.51%
- Rental vacancy rate: 5.80%
- Rent to income ratio: 17.1%
Over 385,000 people reside in Cleveland, which was recently named the fifth-best city for jobs in 2020. Cleveland’s healthcare system is robust while retaining a small-town feel.
- Home value: $620,000
- Home value appreciation: 21% YOY growth
- Effective property tax rate: 1.35%
- Rent-to-home value ratio: 3.36%
- Rental vacancy rate: 5.57%
- Rent to income ratio: 19.67%
Austin has a population of approximately 950,000, and many west coast residents have relocated to the city due to its lower cost of living. There are various natural paths, lakes, and parks throughout the city. The city is home to several tech titans, including Apple and Oracle.
- Home value: $400,000
- Home value appreciation: 16.6% YOY growth
- Effective property tax rate: 1.00%
- Rent-to-home value ratio: 5.44%
- Rental vacancy rate: 6.20%
- Rent to income ratio: 20.47%
The city in the southeast boasts a thriving economy, upscale restaurants, and a pleasant climate. Nearly 500,000 inhabitants have been drawn by the inexpensive housing, historical significance, and other facilities.
Charlotte, North Carolina
- Home value: $385,000
- Home value appreciation: 20.3% YOY growth
- Effective property tax rate: 1.05%
- Rent-to-home value ratio: 4.86%
- Rental vacancy rate: 7.12%
- Rent to income ratio: 19.5%
The city in North Carolina has a population of more than 850,000 inhabitants. Charlotte boasts a robust employment market, a gorgeous city, and excellent weather. All of these advantages are accompanied by a low cost of living.
- Home value: $459,000
- Home value appreciation: 27.6% YOY growth
- Effective property tax rate: 0.61%
- Rent-to-home value ratio: 4.04%
- Rental vacancy rate: 4.98%
- Rent to income ratio: 21.0%
Phoenix is in high demand, as evidenced by the fact that it attracts more than 1.6 million tourists each year who seek the city’s central location among several attractions. Many activities are available inside the city, but the Grand Canyon and Las Vegas are also nearby. Summers are warm, yet it does not snow in the winter. The population of the city is 1,6 million.
- Home value: $579,000
- Home value appreciation: 19.4% YOY growth
- Effective property tax rate: 0.60%
- Rent-to-home value ratio: 3.26%
- Rental vacancy rate: 1.64%
- Rent to income ratio: 19.3%
Boise is a relatively tiny city on the list, yet it possesses tremendous potential. Boise is home to almost 226,000 people and some of the most beautiful trails and mountains. The abundance of outdoor activities is accompanied by a low cost of living and ideal weather. The occupancy rate of Boise’s rental apartments is high.
Where to Get Started Investing in Multifamily Properties?
Investing in multifamily properties offers you access to fantastic real estate. You may produce cash flow, scale the model with more efficiency, and gain appreciation. Nonetheless, these properties have excellent house values. You will be required to make substantial down payments and maintain mortgage payments. These multifamily houses have a high barrier to entry, but Smartland can make them more accessible to investors.