Best Places to Buy Multifamily Rentals

Many single-family house landlords wonder if entering the multifamily apartment market might be the ticket to higher returns.

In our polls of real estate pros, they chose multifamily as the market they were committed to investing in 2023/2024.

Multifamily investing means buying units in buildings which makes it a different management experience with unique requirements, financial skills, government regulations adherence, and maintenance skills.

With single-family housing so expensive and in limited supply, mixing in multifamily units is a sensible business growth strategy.  You’ll be tasked to find investible properties in the best places (cities, states, neighborhoods).

What is the Essence of Buying Multifamily Properties?

6 Keys to solid multifamily property investing are:

• Choosing the right place, city, state and neighborhood — Look for cities/states with solid renter demand, with rising employment and population, potential for rent rises, low maintenance and local government regulations.
• Setting your budget — your funds for operations, capital improvements, renovation costs, and emergencies.
• Starting with a smaller number of manageable buildings and units — duplexes, four-plexes and small apartment blocks are a better starting point for multifamily property buyers.
• Professional Guidance and Competent Staff — hiring qualified investment advisors and competent property management staff helps you build mastery in this housing sector. And you can still manage apartments yourself as a landlord using multifamily property management software.
• Set The Right Rent Price: Finding comps in the area/neighborhood helps you avoid under or overpricing your units. See more on setting rent prices.
• Prepare for the Unexpected: Plan for lower-than-ideal rental income including unexpected vacancies and advertising costs so you are budgeted for costly events.

If you buy a complete apartment building, you would be responsible for the upkeep of the entire plumbing, heating, electrical systems and any physical amenities. And of course, you’re responsible for finding tenants, collecting rent, conducting maintenance, providing services, and more. The cost rises but so may the profitability of your multifamily investment.

It’s at a larger scale with more tenants and units ranging from a collection of apartments in different buildings to 4-plex or 6-plex buildings to whole apartment or condo buildings. For a small business landlord, the best approach is to own more individual apartments or condos or venture into small buildings of 4 to 8 units. These can be managed more cost-effectively and leverage your current resources and skills better. Some advisors suggest diversifying portfolios as well.

Where are the Best Places to Buy Multifamily in the US?

A vast market awaits from Florida to California to Washington to North Carolina. Each city/state has its own unique investment profile.

Crexi, a market and property data company cites these cities as having the best investment value for multifamily property buyers, based on data from CensusReporter and DataUSA.io. You can view Crexi Intelligence’s report.

The 3 key statistics cited in this post are: sold property price, sold cap rate (The cap rate is the ratio of net operating income to property asset value based on the selling price preferably above 5%), and the price/rent ratio.

Of course, there is much more to calculating the investment value and performance of multifamily portfolios.

1. Jersey City New Jersey: Blessed with a predominantly renter market (70%), this growing city sees strong demand for its rental properties. The median sold price of units is $660,000 with a sold cap rate of 4%. The average rent for a 2-bedroom unit is $3,900 per month.
2. Madison Wisconsin: A college town with a low unemployment rate, creates a solid investment opportunity for landlords. Median sold price comes in at $425,000 with a sold cap rate of 5.8%. Average rent for a 2 bedroom unit is $1650.
3. Columbus Ohio: A city with lower property values and rent prices within a growing and newly diversified economy is drawing the attention of investors. Median sold price of unit is $284,000 and sold cap rate of 8.1%. Average 2-bedroom rents for $1,379 per month.
4. Knoxville Tennessee: A city with growing diversification, population growth, low property prices and rents, with a young population with growing incomes. Crexi Reports an average property price of $482,000 and a sold cap rate of 8.7%. The average monthly rent of 2 bedrooms is $1,590 per month.
5. Pittsburgh Pennsylvania: Rising job growth with a solid economic base, combined with low property prices and lower rents is attracting renters and investors. The median rent for a 2 bedroom is $1456 per month, while properties sell at $235,000 with a sold cap rate of 7.2%.
6. Louisville Kentucky: Another southeastern city thriving in the last few years, it offers an educated and well-paid population of renters. Median rents come in at a very low $1,160 per month and the median 2-bedroom apartment sells for $299,000 with a sold cap rate of 7.2%.
7. Brooklyn New York: The growth of NYC and Manhattan has created significant demand in Brooklyn. Aided by the return-to-head-office work command, demand for multifamily apartments in Brooklyn has risen. The median rent for a 2-bedroom apartment is $4,995 per month with a median sold price of $807,000 and a sold cap rate of 5.6%.
8. West Palm Beach Florida: An amazing climate, pro-landlord regulations and a low tax rate environment is drawing significant interest from US, Canadian and International investors. Rent prices for a 2-bedroom unit average about $2,300 monthly, with a median price of $545,000 and a sold cap rate of 5.2%.
9. Raleigh Durham North Carolina: Strong population and employment growth and a large student population give Raleigh a solid multifamily apartment outlook. Median apartment prices sell at $600,000 with a $1560 per month median rent for a 6.6% cap rate.
10. Oklahoma City, OK: A young, highly educated renter base finds renting in Oklahoma City a bargain at $1,050 for a 2-bedroom unit. The median sales price of an apartment is $225,000 making your investment money go further here. The sold cap rate is a high 8.6%.

Discover more about Multifamily investing at Crexi Intelligence.

Saint Investment, a Real Estate Asset Management company located in California published its list of the best places to own multifamily properties. Let’s see why they chose their list of 10 best places to buy multifamily real estate.

1. Salt Lake City, Utah: a strong economy with a low median sales price of $194,216, rent of $2,075/month, and a cap rate of 4.2%.
2. Orange County, California: Big growth in Anaheim, Irvine and Huntington Beach and a 43% renter base.
3. Charlotte, North Carolina: A fast-growing economy in NC is drawing new residents with a rising median household income.
4. Raleigh And Durham, North Carolina: A large, growing population with rising incomes and lower property price points.
5. Washington, DC: a recession-resistant government town means consistent rent and lower vacancy rates.
6. Fort Lauderdale, Florida: Big attraction for companies leaving high tax states such as New York and California with fast-rising rent prices.
7. San Antonio, Texas: Strong population growth with low asking rents means more continuous demand from renters in the oil state.
8. Orlando, Florida: Another attractive place in Florida for investors with low asking rents and room for growth.
9. Inland Empire, California: strong renter demand in Riverside-San Bernardino-Ontario cities from those fleeing big city malaise will put upward pressure on rents, given the low level of new construction delayed by regulations, labor shortages, and out-of-control costs in California.
10. Boise, Idaho: A key pandemic state, Boise offers an amazing commune with nature while rents are reasonable, with lots of room to grow as the US economy recovers in the next 5 years.

It is a daunting prospect to discover and evaluate the best places to invest in multifamily properties as it is to find any place to invest in rental properties in the US.

With the multifamily housing construction boom having taken place in a limited number of US cities and regions, most cities are severely undersupplied. As mortgage rates fall, more renters (i.e. house renters) will be looking to buy which takes single-family housing off the market.

Find out more about the US Multifamily market.

Ask our sales team about the ManageCasa™ platform to help you manage your multifamily and single-family rental portfolio like a pro.

Reach us now at 415 800 1245.

More from our Blog: Best Cities to Invest in Real Estate | Best Cities in California to Invest | Best Florida Cities to Invest in Real Estate | Apartment Management Software | Multifamily Market | Multifamily Management Software | Multifamily Trends | NMHC | Diversifying Rental Properties | Single Family Property Management Software | Florida Rental Market | Florida Housing Market | Rental Housing Market Forecast