Through the first half of 2019, inbound investment capital to the multifamily housing sector in the U.S. reached almost $6 billion, an increase of 6% from the first half of last year.
The five highest growth markets for multifamily housing investment are Boston, Las Vegas, Orlando, Denver, and Chicago, according to CBRE. Growth of investment volume in these top markets ranged from 154% to 938% year-over-year. In our recent Multifamily Report, we identified a few key markets with a huge amount of growth in transaction volume in secondary and tertiary markets, including Indianapolis, Cincinnati, Phoenix and Houston.
In this article we’ll look at why so much investment capital continues to be placed in multifamily housing, and highlight low-cost multifamily property in 23 key markets in the U.S.
Why invest in multifamily property?
Just because so many people are doing something it doesn’t mean that you should too. However, when analyzing the performance of the multifamily housing market there are some pretty compelling reasons why so many investors are placing capital in this asset class.
In August, Freddie Mac published its Multifamily Midyear 2019 Outlook report. The firm notes that the multifamily market closed out 2018 much stronger than anticipated and has remained robust through H1 2019:
- Rent growth in 2018 was 5.1% and vacancy rates were 4.8% as the continued increase in single-family home pricing makes renting more affordable.
- Absorption remains strong in 2019 even as more supply comes to market to meet the overall housing shortage in the U.S.
- Loan volume for multifamily product is projected to increase by 8% in 2019, to a total level of $336 billion, provided rates remain around 2.2%.
How Affordable Can Multifamily Investing be?
By now, we’ve all heard about how millennials are struggling to purchase homes. And after viewing a report published by Zillow on homes in major metros purchased for under 250K, we decided to take a look at Multifamily properties sold for the same amount across the country.
Multifamily property in 23 top U.S. markets
Here’s a snapshot of some recent multifamily property transactions with selling price points below $250,000 in 23 top markets across the U.S.
- Seattle: Vacant residential land 5.8 miles from city center on Ranier Avenue. Lot size 4,017 SF / $150,000
- San Francisco: Vacant residential land 5.6 miles from city center on Tioga Avenue. Lot size 2,495 SF / $233,500
- San Jose: Duplex 2 miles from city center on Delmas Avenue. Building area 2,263 SF / $209,500
- San Diego: Duplex 13 miles from city center on Elm Avenue. Building area 8,721 SF / $173,000
- Las Vegas: Duplex 2.1 miles from city center on Philips Avenue. Building area 2,279 SF / $200,000
- Phoenix: Duplex 1.9 miles from city center on 17th Building area 1,481 SF / $178,000
- El Paso: Duplex 13 miles from city center on Lee Elder Drive. Building area 1,529 SF / $177,200
- Denver: Multiunit property 7.4 miles from city center on Decatur Street. Building area 8,555 SF / $120,000
- Dallas: Duplex 2.4 miles from city center on McCoy Street. Building area 960 SF / $213,220
- Fort Worth: Duplex 10.6 miles from city center on Creek Drive. Building area 1,225 SF / $132,200
- Austin: Duplex 7 miles from city center on Circle S Road. Building area 1,456 SF / $247,500
- San Antonio: Multiunit property 6 miles from city center on Overhill Drive. Building area 1,622 SF / $192,000
- Houston: Duplex 9.5 miles from city center on Larkspur Street. Building area 4,000 SF / $187,500
- Chicago: Multiunit property 12.7 miles from city center on 91st Building area 5,960 SF / $215,000
- Indianapolis: Duplex 5 miles from city center on Graceland Avenue. Building area 1,311 SF / $206,250
- Memphis: PUD (planned unit development) 12 miles from city center on Sylben Cove. Building area 1,710 SF / $225,000
- New Orleans: Quadruplex 7.5 miles from city center on Dale Street. Building area 3,456 SF / $230,000
- Charlotte: Single unit in multifamily property 3.5 miles from city center on Heflin Street. Building area 1,500 SF / $182,000
- Jacksonville: Duplex 1.4 miles from city center on Cottage Avenue. Building area 3,223 SF / $242,000
- Boston: Vacant residential land 11 miles from city center on Wachusett Street. Building area 5,026 SF / $210,000
- New York: Duplex 11 miles from city center on White Plains Road. Building area 1,690 SF / $235,000
- Philadelphia: Multiunit property 4.6 miles from city center on Airdrie Street. Building area 1,664 SF / $165,000
- Washington, D.C.: Vacant residential land 2.2 miles from city center on 2nd Building area 4,518 SF / $206,500
How to Locate more Multifamily Deals
Even though multifamily completions have been higher than the previous few years, Reonomy doesn’t anticipate a substantial slowdown in the multifamily market, due to the overall shortage of housing. In fact, if vacancy rates continue to remain below the historical average – as they have since 2010 – rent growth and income from multifamily investments in 2020 could come in stronger than the projected 3.6%.
When looking for Multifamily deals, we see a lot of investors and brokers using Reonomy’s platform. Reonomy provides over 200 filters that can be used to narrow your focus from over 4.3M multifamily properties to a specific price point, asset type, building size and location. Whatever your ideal investment looks like, you can find it on Reonomy.