Kansas City Multifamily Outlook 2023+?

Question

Hi All,

Happy holidays! I'm curious to hear people's opinion on how the KC multifamily market will perform in 2023 and beyond. From the research I've been doing from out of state, the market is performing well and shows signs of being resilient in a recessionary environment:

- Unemployment is ~2.7% which is below national averages

- Vacancy is low at 3.1% despite rents increasing 9.7% from last year

- There's not a lot of new inventory coming on market (# of units grew only 1.9% this year)

Combining all this with the fact that housing prices have increased, so that it's more unaffordable to buy a house at this time, bodes well for multifamily.

But what's it like to be actually in the market? Are multifamily leasing agents making a killing on commissions while realtors aren't doing so hot? Is it harder to find deals now since there's so little new construction?

I'm looking for a smaller multifamily (6-10 units), so this doesn't apply to me much, but cap rates have declined and are trading at 6s on average. I took these figures off a Q3 report, but was interested to hear what people who are in the market are experiencing. Any and all thoughts are much appreciated.

Alex Olson · Answer

There are some good videos I have done on the KC market and how it shows that throwing a dart at the KC metro will produce good returns (almost) no matter where you invest. It's a great cash flowing market and depending on your experience level and what you want you can scale pretty quickly. If you want to talk more just DM me.

Randy Smith · Answer

@Snehann Kapnadak.  I bought some single family, turn key properties out there in 2017/2018, and I did pretty well on them.  I've since moved over to the multi family space as an LP.  I have a friend that is from the KC area that did a 100-unit heavy lift (18% occupied when he bought it), and he was able to turn it around and do very well.  We're in the process of looking for more deals in the area, but my partner has not been able to find anything that will pencil over the past few months with all of the changes that are going on in the market.

My advice would be to be patient, build a strong team, and consistent underwrite deals.  You'll know when you come across a good one.

Steven May · Answer

We are still actively doing several small multifamily deals throughout Kansas City. Alot in the submarkets like Independence, Raytown, & Blue Springs. We have not seen multifamily adjust to the higher rates like SFHs due to lower volume but of course it is the slowing of winter time. We hope to see inventory pick up here but cap rates will remain steady.

Caleb Brown · Answer

Currently multi family is holding strong. With the developments and people migrating it helps keep prices stable. I do think it will start to level out. I haven't seen it slow down much BUT I do think Q1 will be slower. Once it hits March I think it'll pick up more steam.

Stephanie P. · Answer

We are seeing  lot of interest from the lending side in KC.  DSCR is still going strong and properties are still cash flowing there.

@Alex Olson, @Evan Rice, @Justin Moy, @Milton Chamberlain, @Joseph Crunkilton, @Randy Smith, @Brandon Carlson, @Steven May, @Snehann Kapnadak, @Caleb Brown

Wanted to give a shout out to those boots on the ground

Stephanie

Milton Chamberlain · Answer

boots on the ground; it (anecdotally) still seems pretty stable and doesn't seem to be slowing at all. Certainly not like it was when 30 year rates were under 4.5% last year, but still cruising.

Currently looking for a house-hacking buyer in 'A' markets (Lee's Summit, Blue Springs, Liberty, OP, NKC) and anything worth a damn gets snatched up pretty quick (<7 days) (financially speaking, these duplexes have not been great with cash flow <200, COC return <7%, and CAP rates <7%)

I listed and sold a banged up triplex in in a 'C-D' neighborhood for its appraisal price of $365 last month. It was on market for a couple weeks. (financially speaking, numbers were great, but once again, 'C-D' neighborhood...)

Looking for another investor for an add value multifamily in the Northland. There is not a ton of add-value on market up north, but a few we are talking to to see if we can get price down to where the deal would makes sense. (in B-C market)

Thats my two cents! ;)

Evan Rice · Answer

@Snehann Kapnadak - great post! We do multi-family deals in KC, Colorado, Utah and Arizona  and the vast majority of our deals are getting done in the KC area vs the rest of our markets. Reason being the purchase prices are lower, higher cap rates, cash flow is better with a similar looking appreciation picture. Plus, we have rockstar PM's in the KC area who help us pick our spots. We are VERY optimistic about the short and long term multi-family market in KC.

Snehann Kapnadak · Answer

@Steven May, thanks for the insights. Looking forward to reconnecting.

Thanks for the advice @Randy Smith. I bought a turnkey single family in 2017 as well and it did well, but I'm definitely interested in finding good partners and scaling into multifamily. Definitely will continue following your content.

Brandon Carlson · Answer

@Snehann Kapnadak I'm also exploring Kansas City. Which areas are you considering?

Snehann Kapnadak · Answer

Thanks everyone! This was very helpful. Sounds like the market is poised for some growth over the next couple of quarters.

Kansas City Multifamily Outlook 2023+?

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