Key Factors to Consider When Choosing a Market for Multifamily Real Estate Investments
- Noah Avery
- Nov 17, 2023
- 2 min read
Updated: Jun 22, 2024
Which state
MSA (region)
Neighborhood. Look at these as you see deals that fit your criteria. Build up a map you know for a fact that you want to stay out of.
Criteria
State
Population growth. Real estate is supply and demand
Job growth
Rent growth. If there is a lot of population growth, but not much rent growth, the market might be oversupplied in the number of apartment units. More housing than is needed
Landlord friendly states
MSA
Job diversity. Not reliant on one supplier (risk like in Walmart going down and all businesses required to have office where Walmart headquarters is leave instantly)
100K+ population. Better demand and rent growth usually in these locations
Sources to use market information
Google. Ex: What is the population growth in Dallas, TX?
Urban land institute. 120 page report. Free online. Put out every year
Uhaul / Van lines reports. Uhaul reports every year
Redfin reports
Co-star
Neighborhood
$45K+ income per year household income. Most property management companies require a 2.5-3X multiple to the rent. 1K a month rent needs 3K to even qualify to rent. Will the tenants still be in this 3X ratio if you raise rents where you want them? You can find household income from city-data.com on the interactive map.
Close to jobs. People don’t want to drive a long way to work long term. It translates to a higher turnover in units.
Close to shopping. Within a 10 minute maximum drive from the closest shopping center
Close to school. Sometimes people rent for longer periods of time because they don’t want their kids to switch school. They tend to be better tenants as well because they don’t want to get evicted.
Established areas are preferred.
Think in terms of what the buyer will look for when you go to sell. -your exit- If the market is good, someone else will notice and want to buy it too.
