10 Best Cities For Multifamily Investing in 2022 - LBC Capital Income Fund, LLC
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10 Best Cities For Multifamily Investing

10 Best Cities For Multifamily Investing

National multifamily occupancy rates are at record levels, with many apartment markets seeing a solid increase in rents. Due to RealPage, nationwide effective asking rents have increased by 8.3%, constituting the most significant gain since 2010. While rent growth may not be as strong going forward, demand for multifamily investments is predicted to remain influential in 2022.

The best-performing multifamily markets between 2022 and 2023 are located in Boise, Phoenix, Worcester, Tucson, and Salt Lake City, with predicted rent growth of 12% or even more. Also, Northeast markets such as Philadelphia, Pittsburgh, and Harford are expected to see a rent growth of 6% or less between these days and 2023.

The Best Cities for Multifamily Investing in 2022

According to RealPage reports, 15 multifamily markets are expected to see 10% or more rent increases in 2022 and 2023, with apartment markets in the West part of our country such as Boise, Phoenix, and Tucson are leading the way. 

As the pandemic recovery continues, some multifamily markets will outperform others. The most recent Emerging Trends in Real Estate report by PwC and the Urban Land Institute lists the top US multifamily markets with the highest buy ratings based on current performance and long-term fundamentals.

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1. Inland Empire

The Inland Empire consists of the Riverside-San Bernardino-Ontario, CA metro area. Emerging Trends classify it as an established market adjoining the nearby high-cost market of Los Angeles. As a result, multifamily investments in the Inland Empire benefit from in-migration from neighboring LA.

The population of the Inland Empire grew by 0.61% last year, which is 4.65 million residents as of now. Of the nearly 1.6 million housing units, 36% are occupied by renters paying a rent of $1,821 per month. The vacancy rate is 1.9%, and just 3,447 units are under construction. Rent takes up 20.3% of the 2-person annual wage income in the metro area, where the median household income is $70,954.

2. Raleigh/Durham

Also known as the Triangle, the multifamily market’s performance in Raleigh/Durham remains the same as positive net absorption and new supply lure investors to this top-performing market. 

The region’s population is more than 2 million with a constant growth of 2.10% each year. Of the nearly 863,000 housing units on the market, 36% are renter-occupied, with more than 11,000 multifamily units under construction.

The average rent was $1.31 per square foot per month, growing 8.3% yearly. Median household incomes are $73,654, with a per capita income of $38,760.

3. Salt Lake City

Strong economic fundamentals and better yields than neighboring states fuel the multifamily market’s investment growth in Salt Lake City. The city is home to more than 1.2 million with 0.83% annual growth. 

Cap rates and transaction sales price per unit shows the strong investor demand for multifamily investing in Salt Lake City. Over the past year (Q3 2020 to Q3 2021), cap rates have declined from 5.0% to 4.2%. Additionally, the sales price per multifamily unit has increased from $192,424 to $194,216. 

The median household income in Salt Lake City is $80,196, and per capita income constitutes $34,445.

4. Boise

Although apartment rents in Boise have dropped this year slightly, they have increased by more than 26% over the past three years. Boise’s metro population is home to 750,000 and 224,300 within the city limits at most recent measures, growing by 2.29% year over year.

About 38% of the 289,731 housing units in Boise are occupied by renters, pushing vacancy rates down to just 3.8%. Effective asking rents per multifamily unit are $1,399, an increase of 15.9% year-over-year, with rent taking up 17.2% of 2-person annual wage income.

5. Orange County

Employers in Orange County are bringing workers back rapidly, helping to keep the demand for multifamily housing strong. Located just south of Los Angeles, nearly 3.2 million people live in the metro area, including major cities like Anaheim, Huntington Beach, and Irvine.

The vacancy rate has increased to 3.8%, and asking rents have inched up by more than 5.5% year-over-year and currently stand at $2,075 per month. Investor demand for a multifamily property in Orange County remains strong, with cap rates down to 3.8% at a median sales price per unit of $351,200 year-to-date.

Of the more than 1.1 million housing units in the metro area, 43% are occupied by renters. The median household income in Orange County is $95,935, which is about 20% higher than in California.

6. Charlotte

Steady fundamentals keep the multifamily market in Charlotte solid, with a diversified economy helping the market remain healthy. The population grew by 2.6 million last year which is a 2.63% gain. Currently, about 1.1 million housing units are on the market, with 35% renter occupation and 6.4% vacancy as of Q3 2021. Developers delivered 10,511 units over the past 12 months, with another 10,790 units under construction. 

Monthly rents is $1,423, increasing 1.8% year-over-year. Also, while multifamily rents in Charlotte are rapidly rising, housing is still relatively affordable. Rent as a percentage of 2-person annual wage income is just 14.5% in the metro area, where the median household income is $66,399, about 20% higher than in North Carolina.

7. Washington, DC-Northern VA

The Northern Virginia suburbs of Washington, DC, are a leading data center hub for companies such as Amazon Web Services, Google, and Microsoft, helping keep the job market growth and the demand for stable housing. The location is a home to nearly 6.3 million residents, and the metro area population has grown by almost 0.5% over the past year.

About 36% of the 2.4 million housing units in the market are occupied by renters paying a monthly rent of $1,944.During the last year, rents have increased by 10.1%, and vacancy is just 6.4%, down from 7.9% one year ago. Also, more than 13,450 units were delivered to the market in the past 12 months, and another 30,384 are under construction. The median household income is $105,659, about 40% higher than the Virginia average.

8. San Antonio

Although the recession impacted the San Antonio apartment market, multifamily rent growth in the city is stable and nearly 15% above the national average.

San Antonio is home to over 2.5 million and has grown by 1.31% in the last year. As a result, demand for a rental property remains strong and stable, with 37% of the 914,421 housing units occupied by renters. 

Vacancy rates have declined from 9.6% to 6.3% over the past year, causing rent prices up by 13.3% year-over-year. As a result, multifamily rents in San Antonio are $1,157 per month, perfectly fitting into most households’ median income of $62,355. Nearly 11,000 units were absorbed over the last 12 months, with another 7,265 units currently under construction. 

9. Fort Lauderdale

Emerging Trends describe Fort Lauderdale as an 18-hour magnet city and a migration destination for both people and companies. Fort Lauderdale’s population is about 2 million, and the metro area population has risen by over 10.6% since the most recent census. 

Amongst the 828,571 housing units in the market, 38% are occupied by renters paying $1,735 per month. The rent prices rise by 11% year-over-year, and the vacancy rate is down to 4.3% versus 6.7% in Q2 2020. Nearly 8,900 units were absorbed over the past 12 months, and over 27,500 units are currently under construction. The median household income in the metro area is $61,502, and per capita income is $34,357.

10. Orlando

Orlando is the only niche market to make the top 10 list from Emerging Trends. 

The city is home to more than 2.6 million residents, with a population growth of nearly 1.4% over the last year. During the past year, median household income increased by 5.6% to $61,875, while the job market grew by nearly 3.6%.

Multifamily vacancy rates in Orlando are down to 5.1% versus 9.5% in Q3 2020, while effective rents grew by 22.7% to $1,601 per month. Over the past year, 15,260 units were absorbed, and another 12,647 are currently under construction.

Things You Should Know Before Investing in Multifamily 

After covid recovery continues, the demand for rental property is predicted to grow fast in 2022. Due to CBRE, vacancy rates and cap rates will decline over the next 12 months, with rents exceeding pre-crisis levels by Q2 2022.

There are several things investors should keep in mind when choosing the best cities for multifamily in 2022:

  • Cities heavily dependent on tourism, hospitality, and retail may see income and employment levels rise slower.
  • Many renters are uncomfortable taking public transit, helping drive the demand for multifamily properties in suburban areas and smaller secondary and tertiary cities.
  • Living and outdoor spaces will continue to be wanted as more people work from home.
  • Millennials are slowly trading urban living for less-dense housing options in submarkets and the suburbs.

Although the multifamily market has held up well, many investors are still sitting on the sidelines. However, as the economy begins to recover and the pandemic is held under control, institutional and value-add buyers should become much more active next year, with foreign buyers also increasing their investment activity in the US.

If you have any questions, feel free to contact us! 

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