This article is part of our passive investors guide on real estate syndications, available here.
Multifamily real estate is a long-term investment. As an investor, you must pay attention to the future fundamentals of the market you are looking to invest in.
This post breaks down the top markets for multifamily investing in 2023. We hope it assists you in selecting the right market or markets for your hard-earned dollars, whether you’re a new investor just getting started or an experienced investor looking to diversify your portfolio.
What Makes a Market One of the Best Markets for Multifamily Investing?
The pre-COVID worries about an oversupplied multifamily sector have quickly given way to the shift that more housing is needed in the United States to meet current and future demand.
Due to the increased cost to build, commercial real estate investors continue to opt to purchase existing apartment communities well below their replacement cost. There has also been a shift in institutional capital allocation towards the multifamily assets class, meaning more capital focusing on purchasing a finite amount of apartment communities. As a result, this raises the price investors are willing to pay if they want to transact.
The top 8 U.S. multifamily markets reviewed below have been examined and ranked as per six critical criteria, each of which is made up of a large number of unique indicators that show the strength or weakness of the market.
The following are the six factors that make a real estate market one of the best markets for multifamily investing:
- Supply & Affordability of Housing
- Employment Market Stability
- Risk vs. Reward
- Life Quality
- Financial Health
The real estate market is a good illustration of how supply and demand operate within an industry. Property prices or median property price frequently increases when demand is high, but supply is limited. Landlords may drop their prices when there is an excess of housing on the market since there is less demand.
Demographic considerations tend to foretell future markets, such as expanding or diminishing populations. Let’s imagine an investor is planning to purchase a property and is aware that the local population is growing. He/she can be sure that this is a great sign for potential business opportunities in the future.
The supply and demand for labor, wherein employees give the supply and employers provide the demand, are referred to as the labor market, also referred to as the job market. It is a crucial part of every economy and is closely connected to the demands for goods, services, and capital. It includes the U.S real estate market. Therefore, stability in the labor market can be a good indicator of the viability of investing in a real estate market.
Investments are risky by nature. Returns can be considered the compensation investors receive for the risk they take. Before taking on those risks, real estate investors must ensure they can be feasibly compensated for the more significant threats they face in the real estate market.
The price of properties in a real estate market and life quality are intricately linked. For example, high housing prices in a market can indicate that housing is just expensive, but it can also suggest that the house and the area offer a good standard of living.
The state of an area’s economy as a whole significantly impacts the value of the real estate. Economic metrics like the GDP, employment statistics, industrial production, retail pricing, etc., are typically used to measure this. Generally speaking, real estate suffers when the economy is weak.
Related Read: Multifamily Market Analysis
Best Multifamily Investment Markets
Your success in multifamily investing largely depends on where you buy. You could acquire a seemingly great property that you renovated to modern finishes with great amenities. Still, you can have trouble finding tenants if it’s in the wrong area.
There are a few places worth researching further if you’re considering investing in real estate this year due to anticipated price increases. We looked at statistics and market trends from across the country to create this list of the top places in the U.S. to invest in multifamily real estate in 2023.
The eight best places to buy rental properties or multifamily units and invest in multifamily housing are listed below. They all have advantages and disadvantages, but many are less expensive than the national average.
Atlanta’s population as grown by more than 14% over the last ten years. The expanding population is the main factor driving the need for dwellings. Real estate investing is centered in the Georgian state’s capital city of Atlanta. Atlanta has experienced optimistic job and population growth, two signs of a solid multifamily market.
Atlanta is a city where real estate investors might find opportunities. Atlanta is one of many hot spots countrywide, and buying property here might be a wise choice given the promising multifamily housing market and flourishing economy.
Houston is a place where real estate investors can get everything they need. It is the fifth-largest metro area in Texas with a population of seven million people and is the location of 53 Fortune 1000 corporations; more than twice as many people are moving there as in other places of America.
Houston has a healthy job market that sees consistent job market growth. That means that more and more people are coming in search of employment. The multifamily market is not constrained, even though the home market is. People relocate and rent here. People would kill to migrate to an area with low entrance barriers, affordability, and an affordable cost of living.
Las Vegas, Nevada
2021 saw Las Vegas real estate values soar by double digits for the second year in a row, an extraordinary rise (which has raised fears that current buyers may be paying too much.). Local builders have heard the message loud and clear, and a steady supply of new homes is already starting to emerge. Las Vegas still has a ways to go, even if it is a multifamily market regarded as established.
Phoenix has been the sixth most active multifamily market in the United States during the past ten years. Three factors, including population growth, a housing boom, and a sharp rise in rental activity, explain why this city made our list.
Charlotte, North Carolina
Most of the 143,000 new residents that moved to Charlotte over the past ten years came from New York, making the Charlotte metro region the second-largest financial hub in the U.S.
A mix of white-collar and blue-collar jobs, millennials with a solid inclination to rent, and the age range of 27% of the population make the area attractive to a wide variety of people. Despite continuing completions, the population growth will probably continue to maintain rentals.
For those seeking stability and strong returns, Charlotte is among the top cities to invest in multifamily real estate in 2023.
Raleigh/Durham, North Carolina
Raleigh is expected to have strong growth in home prices, according to real estate analysts. A long-term pattern of population increase in the area is reflected by the fact that Apple launched a new facility in Raleigh’s Research Triangle Park the year before, bringing freshly developed tech jobs to the region. It makes Raleigh/Durham a great multifamily real estate market for investors.
Austin is one of the most popular real estate markets in the U.S., and it’s easy to see why given the city’s rapid population and employment development, low inventory, and slow rate of new supply. Nevertheless, the price-to-rate ratio is higher than most marketplaces mentioned here.
Austin is frequently ranked as one of the greatest cities in the U.S. due to its high quality of life, pleasant climate, and robust local economy. With 10,301 new units created in 2021.
For several reasons, Tampa will always remain at the top of any list of the best multifamily markets 2023 investors will take into account.
For starters, the city’s population increased by 27% between 2010 and 2020, and it is anticipated that this expansion will continue in the years to come. It is partly attributable to the city’s robust job economy and low cost of living.
Additionally, Tampa is home to many retirees. Thus there is a constant need for rental properties. Tampa is a highly sought-after location for investors seeking homes in great demand because its average rent costs are lower than the national average. Renting is more common than buying a home in this city for families and individuals.
We have covered all bases regarding the best multifamily real estate markets in the U.S. However, a few frequently asked questions (FAQs) about the top multifamily markets are to be answered. That is what we will be doing next.
Good Read: The Multifamily Syndication Guide
Frequently Asked Questions About The Top Multifamily Markets
Most multifamily residences are currently found in New York and are dispersed throughout the five boroughs. Pricing in the boroughs is exceptionally high despite the state’s abundance of properties and considerable demand, which makes it a challenging feat for new investors entering a market.
Due to their ability to accommodate more renters, multifamily properties have more income potential than single-family homes, even when turnover occurs. Despite the current temptation to sell due to high property valuations, there are several reasons for you to retain and grow your multifamily housing investments in 2023.
Best Multifamily Markets 2023 – Conclusion
Understanding the fundamentals of why a market is well insulated and has strong vitals is crucial for success in multifamily real estate investing.
The list we put together in this post goes through some of the variables as to why some of the markets mentioned above have grown and will continue to grow.
Join the Investors Club here at Willowdale Equity to get access to our private value-add multifamily real estate investment opportunities across some of the strongest markets in the southeastern United States.
- GlobeSt, “The Top Multifamily Markets and Why”
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