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Which Multifamily Markets are Best

December 05, 2019

Which Cities are Best Multifamily Opportunities?

It may not matter how much the property market rises or declines for property management companies. Growth was the theme in 2019 and it’s back in 2023.

As these reports from Zumper and Freddie Mac reveal, 2018 was a fine year for multifamily — from appreciation to renter income growth. However, the party isn’t over despite growing supply and rising interest rates.

As you’ll see below, smaller metro markets are enjoying strong rent price growth trends (amazing 20+%) and with new supply coming online, these markets may represent optimal ROI for both investors and property managers.

Now, it’s about you digging deeper into the data to find emerging market opportunities and identify the best rental property types.

Property Management Trends

In our property management trends post, we highlighted how opportunities such as Proptech and maintaining occupancy rates are on top property managers minds. And we learned that the US rental market will be propped up a need for almost 5 million new units in the next 8 years. And we took a quick look at Price/Rent ratios.

And we’ve delved into the multifamily property market as keen areas of interest. Given the new focus on property management business survival, all eyes on are on acquisition and the efficient management of multifamily units. It’s a simple formula:

More doors + greater efficiency = property management success

The tools are here. Take a good look at the all in one ManageCasa Property Management Platform. This scalable, cost efficient, and powerful management tool that adds value for your clients. ManageCasa is a modern solution designed from the ground up propel your firm ahead of your competitors.

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ROI Under Pressure

Property managers need to optimize operations in light of this news:

Screen Capture courtesy of Freddie Mac Multifamily Report

The Best Multifamily Markets in the US

Your competitors are on the hunt for the best multifamily markets and developments. So let’s take a look at which markets offer the best prospects.

Screen Capture courtesy of Zumper

This chart above from Zumper reveals the big markets where demand is strongest. In December, one bedroom rent prices dropped strongly in New York yet rose strongly in Boston. San Jose, Los Angeles, and San Francisco saw drops in one bedroom rents while 2 bedrooms were a little more stable. The point here is no consistency between market in different regions.

Which Cities are the Hottest for Rent Growth in 2019?

Zumper shows these metros have the highest recent rises:

Columbus, OH: +23%
Des Moines, IA: +21%
St. Louis, MO: +17.6%
Memphis, TN: +17.2%
Shreveport, LA: +16.1%

These midwest cities may be playing catch up with the rest of the nation.

Don’t discount California rental property opportunities. Oakland, Long Beach Santa Ana, Sacramento, and San Diego posted double digit rent increases year over year.

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Baltimore, Minneapolis, Orlando, Providence RI, Durham, Chandler, Buffalo, Henderson, Salt Lake City, St Petes, and Boston showed particular strength as well. Chicago, Tucson, Bakersfield, and Washington DC saw rent prices unfortunately sunk. You can see more on the zumper report page.

Are Small to Medium Metros the Best Bets?

Given the US economy is coasting nicely and expected to perform well to 2020 despite political battles, the smaller markets might be a better choice for high performing multifamily investment.

Take a look at cities such as Milwaukee, Colorado Springs, Rochester NY, Cleveland, Knoxville, Arlington TX, St Louis, Cincinnati, Reno, Tallahassee, Shreveport, Lincoln, Indianapolis, Memphis, Spokane, Wichita, Boise, Richmond VA, and Madison WI.

Such strange names coming up as the best improved rent price markets. However, smaller might be the theme in 2019. With rent increases so strong, your cost and financing factors might not be as much of an issue.

Before you decide on markets to buy in, take Kiplinger’s advice:

“The bottom line, multifamily buyers are wise to evaluate how apartment deliveries and pending development pipelines in their area could impact asset values and operations for them locally and in markets across the country.” — from their 2019 multifamily report.

The Final Word on Multifamily 2019

Big picture factors include: 2020 elections, Fed interest rate rises, rising operating costs, rent controls, metro new construction deliveries, metro employment rates and income growth.

The multifamily market is evolving for both institutional investors and SMB property management firms. There’s talk that we’re in the later stages of this current multifamily market, but there’s no consensus.

For growth-minded property managers, it’s big markets vs smaller markets in 2023 and making good choices.

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