Where are the best locations for multifamily investments?

Question

I have several articles describing best and worst locations for RE investments. One article mentioned SF and LA so I threw that one out. I've read Denver, Charlotte, Phoenix. Some factors to consider are population and job growth, economic diversity, how landlord friendly the market is, etc. I'm looking at four plexes. Anyone with experience in any locations they think are particularly good and can explain why? Thanks.

PS-anyone looking at Detroit?

Aaron Smith · Answer

You also want to look at job growth, and how much new construction is going on.  Supply and demand for housing.

Aaron Smith · Answer

@Coco Cook

Check out Marcus and Millichap 2016 Multifamily Investment Forecast.  Hopefully they come out with 2017 soon, not sure when that happens.  There is also IRR Viewpoint 2016.

I think its a smart move to look at cities with increasing populations that are in the buyers market part of the cycle.  The county as a whole is in the sellers market part of the cycle, but some cities have better value than others.

Keith N. · Answer

@Alex Franks Yes, I've attended quite a few of the BP meetups for Raleigh members.  There is normally a meetup the last Thursday of each month.  There's normally good turnout with between 15-30 people.

There is also TREIA (Triangle REI Association) but there are costs to attend those and I've never been.

Keith N. · Answer

@Alex Franks I'm an investor in Raleigh and I can tell you that the demand for housing is certainly going up as many people are moving here for jobs.  It's a very competitive sellers market.  Small Multi-Family's in Raleigh (In A, B, and C areas) are hard to come by and get scooped up quickly, but if you get one you certainly won't have trouble finding tenants.  As far as apartment buildings in Raleigh-Durham, I'm not really sure.

Alex Franks · Answer

@Gregory Walter PM as there will be some new quads and triplex's, and duplex's coming to the Charlotte area.

Curious Denver you mentioned  if it becomes easier to deposit funds, should not hurt the market to much there. As the green gold rush will continue. As long as the state is legal and others are not more folks will visit or move. So I think prices will stay up and don't think a market correction is going to happen any time soon there. Sure wish I owned land there I would be popping up commercial space welcoming growers. Hopefully the Carolina's will follow suit one day as well.

Detroit is a favorite of the International investors looking for the 20 to 30 % returns( not happening)  . When majority of folks are leaving a city not sure I would advertise that as a solid place for opportunity.

Just my two cents...

Alex

Alex Franks · Answer

@Coco Cook I try to follow trends where folks are moving to ( we see a big swing in places like texas and NC and SC). I think most of the folks are looking to purchase multifamily in Texas or the south eastern states as our numbers can still some what make sense. Right now I'm seeing doors ( price per unit ) in NC and SC go ridiculous but the supply and demand side. As long as some one is willing to pay, the prices will still go up. The cap rates what some folks are taking are very low. Then again every one has a different thought process.  As for Charlotte we are like Atlanta's little teenage brother growing up. So growth potential here as well as Raleigh and Durham has quite  an upside.

Feel free to PM for more information if I can help.

Alex

James Syed · Answer

Welcome to BP.

I also invest in fourplex and larger properties now.

Multifamily market in general is very hot at the moment. Very low inventory, there are many cities that are still good to get a decent deal from including but not limited to:

San Antonio, TX

Tampa, Fort Meyer, FL

Cleveland, OH

I have mentioned a few here.

Hope it helps.

David Thompson · Answer

Hi Coco,

For duplexes and fourplexes particularly favor San Antonio.  Top 10 city for pop/job growth; diverse industries (top companies are health care, food, financial services - pretty stable w/a strong military presence w/3 facilities that have done well w/base consolidation so far, two even adding jobs.  Texas is a landlord and business friendly state.  I have duplexes and fourplex ideas to share if interested.

Dave

Gregory Walter · Answer

Charlotte is a not a very walkable city but there is a strong consumer preference for areas that have establishments (bars, restaurants, tennis courts, parks, etc.) or public transportation nearby and within walking distance.  If you can find area that are becoming more walkable like areas near Noda, you can do well.  Or if you can buy in area, where an older apartment complex is being replaced by mixed use buildings (residential and commercial establishments) - Silver Oaks being replaced by the Meredian for example, you can do well.   Or where a new light rail station is being placed, you can do well.  Plenty of other ways to make money as well.

There are not a lot of 4plexes in Charlotte but its a great city for rental real estate.  More so then the others you mentioned, I think.  You will have a difficult time find fourplexes here though.  They are not that common in Charlotte.

Denver has been hot but runs a regulatory risk - if it becomes easier for marijuana related business proceeds to be deposited at banks you could stop see a collapse in part of whats currently proping up the real estate market.

There is a lot of opportunity in Detroit but watch out for contingent liabilities from code enforcement issues on deep discount property.

Scott Trench · Answer

Well you mentioned Denver here - I'll just chime in and say that markets like ares are super hot right now. Does that mean that they are going to continue rising rapidly? Maybe, maybe not. I think that the question you are posing needs to be a little more specific.

For example, if I have a 30 year + holding pattern and plan to be in a market for a very long time, I think that Denver, Charlotte, and Phoenix are excellent ones. I see those cities continuing to grow over the short, medium, and long-term relative to other parts of the country, and that probably benefits investors over time.

I personally don't see the same percentage growth continuing in LA and San Fran, so I won't look at those cities. Seems to me that they are peaking a little bit, though that's just an opinion, could definitely be wrong there!

Now, on the other hand, I think that if your holding period is 3-5 years, that it is unwise to look at cities like Denver, Charlotte and Phoenix! You may find that you can't get the cash flow you can in other cities in a short time period like that, and you may find that we are at the top of a cycle. If that proves even somewhat true, you could easily find yourself in a position where you are unable to exit, having leveraged on properties in booming cities. While I believe the fundamentals are strong for these cities over the long-run, anything can happen in the short-run, and you may find that you get burned if you buy, for instance, here in Denver hoping for a quick pop.

Where are the best locations for multifamily investments?

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