Best Cities for Multifamily Investing in the U.S.

A multifamily property contains multiple housing units in just one building. The property can consist of townhouses, condominiums, apartment complexes, and duplexes. Some investors use this for their family consumption, meaning they all choose to live in their multifamily properties, and some allow this to be rental units for others.

Arguably, the best investment in real estate can be multifamily properties. This notion is primarily because it offers excellent investment options for new investors. After all, rental income is one of an individual’s most promising passive income.

Key Factors to Consider in Multifamily Investing

Before we delve into the best cities for multifamily investing, let us first establish the key factors to consider when investing in such properties. These include the seller, total number of units, comparison between the potential income and the acquisition cost, and location.

1. The Seller

It is as essential as the other things to consider who is selling the property because the selling price can change depending on their motivation. Given that it is in the buy-and-sell business, they substantially have the power to set their prices – whether it will be on the average level, below, or higher.

Additionally, the seller may also be just a scammer and not authorized to conduct sales. With this, investors must clearly understand who they transact with to avoid regrets or further complications.

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To give you a tip on this, the treatment of bank-owned properties can favorably differ from that of for-sale-by-owner properties. This indicates the possibility of cost reductions which might provide you with discounted investment properties, not to mention that banks will always be reliable as laws and regulations bind them.

2. The Total Number of Units

The number of apartments on the property, and the rooms in each unit, should be considered by investors. Beginner real estate investors should concentrate their search on three categories of multi family homes such as duplex (two units), triplex (three units), and four-plex (four units). This is because these properties provide the most potential with the least risk, and they are often cheaper.

If you use the multifamily property mainly for rental purposes, the total number of units will also determine how much will be your monthly rental income from that investment.

3. The Potential Income And The Acquisition Cost

This implies the concept of cost-benefit analysis. With every investment, the benefits should always outweigh the costs of acquiring that property. Aside from the acquisition cost, you should also include other potential expenses like maintenance and repair, regulatory fees, etc.

4. Location

As most investors would agree, regardless of whether experienced or beginner, the location is the utmost consideration when choosing a property. One most common question is where are the best places to invest in real estate. This is because a location tells a lot of the opportunities in store for that property investment.

Best Cities for Multifamily Investing

Investors should look for high-yield, high-growth, and well-maintained neighborhoods when investing in multifamily homes. They should also consider the demands of the people visiting or residing in the area.

Best Cities for Multifamily Investing in 2022

Speaking of location, the United States has a lot of specific regions that are good for multifamily investing. You may check best cities for multifamily investing by incorporating the real estate market in the picture. Nonetheless, here are the best cities in the United States, as of 2022, to buy multifamily properties in no particular order!

1. San Diego, California

One of the hottest multifamily and commercial real estate markets in the United States is in Southern California. San Diego is favorably a rising location for both first-time and seasoned multifamily property buyers among its cities. With an employment growth of 1.5 percent and an average annual rent demand of 5.7 percent, investors planning to put up rental business among its residences can be on the good end.

When you are ready to buy your multifamily property, you’ll come across different home loan types. Each loan is different and it comes with its own benefits, and qualifications needed. For instance, if you don’t qualify for a conforming loan, you can choose a jumbo loan. They’re also called jumbo mortgages. Jumbo mortgages in California are nonconforming mortgages that exist to fund luxury homes and properties.

2. Knoxville, Tennesse

Truthfully saving, Knoxville, Tennessee, does not have the most glamorous real estate features, unlike states and cities. However, it can nonetheless provide a diverse range of multifamily investment prospects.

While employment growth has been slow, it is still on a positive figure of 2.1%, indicating progress in the city. Furthermore, being the state of Tennesse’s third-largest city, the demand for quality housing remains high. A 96.6 percent apartment occupancy rate is an excellent opportunity for multifamily investors.

3. Orlando, Florida

Like its tourism industry, which has been a significant contributor to its economy since Disney World opened, its market for job opportunities has also been growing consistently and positively. The city’s employment growth is 4.9 percent, and the demand for rental properties is also increasing by 7.8 percent annually.

4. Tampa – St. Petersburg, Florida

Another city in Florida that is considered one of the best cities for multifamily investing is Tampa-St. Petersburg. The area has been recognized as one of the fastest-growing cities in the state – with 2019’s employment growth at 2.3 percent.

Despite the global COVID-19 phenomenon, it is expected that the job growth will likely be consistent given that major firms relocated their main offices in the area. Their demand also remains high, with an annual increase of 7.3 percent.

Factors to Consider in Multifamily Investing

5. Phoenix, Arizona

Another city in the United States that is determined to be one of the best cities for multifamily investing is Phoenix, mainly because of the tremendous job demands in the area. Its employment growth as of 2019 is 3.8 percent, and its rent growth is as high as 6.2 percent. This is good news for multifamily investors looking to buy a property in that region.

Conclusion

The best state to buy multifamily properties with all the recognized cities previously mentioned can already be derived. This includes the state of California, Arizona, and Florida – with Florida having the most cities with the highest potential in this type of investment.

However, note that it is not absolute information, for data may change unexpectedly, depending on the economic and affecting circumstances. Nonetheless, it is good to have the foundational basis on the rising locations in the country.

For more useful information related to this topic, feel free to check our other articles!