What Are the Best Cities for Multifamily Investing in 2019?

The most profitable cities for multifamily investing depend on a variety of factors, such as employment growth, construction, rent, and vacancy rates. According to Multifamily.loans, the 6 best cities to invest in apartment buildings in 2019 are Minneapolis-St. Paul, San Diego, CA, Orlando, FL, Knoxville, TN, Tampa-St. Petersburg, FL, and Phoenix, AZ.

In Minneapolis-St. Paul, employment growth is 1.5%, construction is 4,900-6,700 units, rent is +5.7%, and vacancy is -0.50%. In San Diego, CA, employment growth is 1.5%, construction is 3,220 units, rent is +5.7%, and vacancy is +0.10%. In Orlando, FL, employment growth is 4.9%, construction is 6,200 units, rent is +7.8%, and vacancy is +0.60%. In Knoxville, TN, employment growth is 2.1%, construction is 1,100 units, rent is +4.0%, and vacancy is -0.60%. In Tampa-St. Petersburg, FL, employment growth is 2.3%, construction is 3,500 units, rent is +7.3%, and vacancy is -0.60%. Finally, in Phoenix, AZ, employment growth is 3.8%, construction is 10,600 units, rent is +6.2%, and vacancy is +0.20%.

These cities are all great options for multifamily investing, as they have strong employment growth, construction, rent, and vacancy rates. However, it is important to do your own research and consider other factors, such as loan terms, before making an investment.

The best markets for multifamily real estate investments in 2019 and beyond are:

• New York City, NY
• Los Angeles, CA
• San Francisco, CA
• Boston, MA
• Washington, DC

For 2023, the five markets with the fastest growing sale prices per unit are:

• San Francisco, CA
• Los Angeles, CA
• New York City, NY
• Boston, MA
• Washington, DC

For more information, check out What Are the Best Cities for Multifamily Investing? and 5 Best Multifamily Investment Markets of 2023 by Growing Property Values.

If you're looking for financing for your multifamily investment, we can match you with the best lenders to get you the best loan terms out there. Fill in the form on our website and we’ll get back to you with quotes at no cost.

The most important factors to consider when investing in multifamily properties are your investment objectives, the type of property you want to purchase, how you will handle the everyday operations of the property, and the market you choose to invest in.

Your investment objectives should be clearly defined before you start searching for a desirable apartment building. Multifamily is typically loosely defined within the industry as a property with five or more units, but it can also encompass duplexes, triplexes, quadplexes, townhomes, and other housing assets designed with multiple families in mind. Depending on market conditions, available capital, and operational plans, each property type has its advantages and disadvantages worth analyzing before settling on any one.

You should also consider how you will handle the everyday operations of the property. Being a landlord can be time consuming and take a lot of effort, but many first-time investors and those with smaller properties end up tackling the daily operations on their own. Larger investors often own multiple properties and cannot stretch their efforts between them all, which leads to the utilization of property management companies.

Finally, you should consider the market you choose to invest in. Many first-time investors purchase properties close to home, mostly to be able to manage or keep a close eye on the asset. However, it can be beneficial to scour multiple markets in multiple regions in search of the ideal environment to chase your original multifamily investment goals. Shopping around in different markets can help you find a great deal.

Investing in multifamily properties can provide a number of benefits, including reliable monthly cash flow from renters, potential for high investment returns, and the ability to take advantage of compounding returns. Additionally, multifamily properties are relatively low risk, and can help you diversify your investment portfolio.

For example, if you buy an apartment complex for $1 million, you may only need to shell out about $200,000 with a great loan. You could then sell it five years later for $1.2 million, resulting in a great return of $400,000.

Using your proceeds, you could invest again in two multifamily properties at similar amounts, and if that appreciates in a similar way, you could walk away with $800,000 after a conservative gain on a sale.

The earlier you start investing in multifamily, the more wealth you’ll have in the long run due to the power of compounding returns.

The risks associated with investing in multifamily properties include expensive purchase costs, rising construction costs, construction delays, and the possibility that the renovation work may not be enough to get the desired investment outcome.

Buying multifamily properties is significantly more expensive than buying single-family homes, therefore, it is usually hard to enter the market as a first-time real estate investor. While banks are usually eager to provide loans, buyers should be able to come with around a 20% downpayment, depending on the real estate market or the size of the property. Source

Construction costs have risen dramatically over the past few years, impacting both ground-up development projects and renovation work. Make sure you do your research and plan ahead with a strong budget before beginning apartment renovations to avoid any nasty surprises. Source

Construction delays are also an unfortunate fact of life. Due to supply chain issues, some cannot be avoided, so it may be best to take a very conservative approach in terms of your project timeline. Don’t assume you will have rents in place the month after your capital improvements are scheduled to wrap up. Source

Finally, your renovation work may simply not be enough to get the investment outcome you’re looking for. You may invest a lot of capital to add the highest-end luxury amenities to a property built in the 1980s, but if potential renters are looking for a newer building, you may not see much of an uptick in occupancy or rental revenue. Source

The multifamily sector has long been regarded as one of the safest investment options in times of uncertainty. The persistent housing shortage and the rapidly rising cost of owning a home are driving healthy property fundamentals, making multifamily the desired investment option.

According to Freddie Mac®’s Multifamily Apartment Investment Market Index, finding attractive investment opportunities this year may be more difficult than it was in 2021, with the index decreasing 17.9% on an annual basis.

Rent rates continued to decelerate in September, falling 150 basis points to a gain of 9.4% year-over-year, according to Yardi Matrix research. This comes after the average U.S. asking rent dropped $1 to $1,718 in August, and growth slowed by 170 basis points on an annual basis, falling to 10.9%. Despite flattening rent growth, national asking rents are still at record highs, and occupancy rates have been hovering around 96% since June 2021, Yardi Matrix concluded.

The five multifamily markets with the fastest growing sale prices per unit last year are certainly ones to keep an eye on. Of course, it’s important to note that previous growth in property values doesn’t mean anything if that growth doesn’t continue, but each of the markets on our list has solid underlying multifamily market fundamentals that should keep them resilient, even in the face of an economic downturn.

If you’re planning an apartment building acquisition, you may want to consider a Fannie Mae Small Loan, a traditional bank loan, or anything in between. Fill in the form on Multifamily.loans and you’ll get back to you with quotes at no cost.