Categories Property Management

Five Best Cities for Renting Properties Now

When investing in Multifamily Properties, it is important to take into account the location. Investment strategy can influence geographic focus, and vice versa.

Many investors, especially those who are relatively new to the real estate sector or multifamily housing, as well as some more experienced investors prefer to invest within certain geographical areas. This is because they know them. They may have lived in certain markets or know the challenges and drivers of the region, along with the specific neighborhoods.

Multifamily investors who have experience tend to favor certain markets, because their properties in these areas have produced positive results and they expect the same in the future.

Investors often seek to diversify geographically by investing in new markets, which have strong fundamentals and higher returns.

My company Trion, as an example, focuses on multifamily investments in emerging markets that have strong population growth and job growth. We look for cities where we can buy properties at a reasonable price and maximize our return on investments (ROI) by making smart improvements that justify higher rental prices.

It is beneficial to invest in markets which perform well even when the times are tough. Not just those that perform well during good times. And certain submarkets that have supply constraints are more resilient.

Here are our current five favorite markets for multifamily investments and why we think so.

Five Best Multifamily Markets for 2019

1. Portland, Oregon

Residents of all ages, including millennials, continue to be drawn to this Pacific Northwest city. The region boasts the lowest cost of living among major West Coast markets.

Rents are rising and occupancy in the region is close to capacity as apartment communities continue being developed and redeveloped. ( 1 ) Investment sales of multifamily products in the second half of 2019 exceeded those of the second half of 2018, by 25%, showing a trend towards higher valuations. Now is the time to invest, before prices skyrocket and while the market is still attracting young professionals.

How to choose an out-of-state market for investment (in three easy steps! )

2. Greater San Francisco Area (East Bay)

tenants as well as investors continue to demand multifamily properties in the East Bay. Both cohorts have been priced out of San Francisco and there is a strong competition among investors. The East Bay’s Alameda County and Contra Costa County saw the largest year-over-year increases in rental rates, with 4.8 percent and 3.3 percentage points respectively. (2)

This market is dominated by the tech sector, which attracts both young professionals and large multinational tech companies.

3. Denver

Denver is a secondary market gaining in popularity among investors. It has strong multifamily fundamentals including decreasing vacancy rate, increasing rental rates and robust development activity. The region is known for its rich history, active lifestyle and beautiful mountain views. The affordability gap in the region is also wide, leading many residents to prefer apartment living to homeownership.

Denver’s in-migration and household formation are both strong, driving the demand for multifamily. The market is experiencing a shortage of vacancies and there are more than 23,000 apartments currently being built to meet this demand.

4. Salt Lake City

Salt Lake City is experiencing a surge in demand for apartments due to the strong job growth. Multifamily rental rates in this market grew by 5.1 percent per year ( 4), but tenants from more expensive markets such as Los Angeles, San Francisco and Chicago are finding Salt Lake City rates to be an excellent bargain. Multifamily investors will find this region attractive because the units are leased almost as fast as they become vacant.

5. Seattle

The demand for rental housing has been particularly strong in Puget Sound, and Seattle in particular. Seattle is a leader in the creation of jobs during this economic cycle, and it’s attracting tech companies from the Bay Area as they tap into its industry foundation.

Tech giants such as Apple, Facebook and Google are well-entrenched in this market. These facts are all positive for Seattle’s multifamily market. The strength of this sector is that it encourages investors to leave the central business district for the suburbs, in search of higher returns.

Apartment demand will keep pace with the supply as job growth continues to rise. This will ensure that the market remains stable for investors.

Bottom Line

There are no guarantees when it comes to multifamily investments and there is risk in every market. However, knowing what to watch for in one particular area can help investors reduce some of that risk and make better choices in line with their investment strategy.

Investors can make better decisions by studying market fundamentals and drivers.

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