Cities for multi-family

Calabasas, CA · Member since 2015 · 11 posts · 15 votes

Narrowed down to multi-family. Looking at Dallas, Austin, Atlanta, Nashville, Memphis, Charleston. Be interested in hearing from folks with direct experience in those markets. Would love some suggested zip codes to run some research. Hold period 5-7 years. Thanks!

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Levi BennettPro Member

Real Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes

Quote from @Marc S.:

@Garrett Crosby I've been looking at Charlotte MFs. Are you finding that you are still getting good purchase prices? I've yet to get my 1st property. I have made contact with an agent there and haven't gotten many good deals. The asking prices don't even come close to the 1% rule.

MF is not normal here, it's nothing like up north. I think a lot of investors from more dense cities assume Charlotte has a higher density but it really doesn't. Typically, MFs here trade between 3.5% - 6% cap. To compound frustrations, already very low inventory is exacerbated by people all over the country that see Charlotte on the internet as a good place to invest and think they can apply what they know about MF to Charlotte.. it doesn't work, yet (literally) 10s of thousands of new investors look here every year for the same couple of hundred MF properties. To give you more perspective, most of these owners get 1-5 offers PER DAY since 2017. You will not find a "good deal" in MF in Charlotte without enormous luck. If you want 1% rule in the Carolinas, invest in short term rentals.

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Bruce Lynn
Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes
3y
In Dallas area I would look at Sherman/Denison/Anna/Van Alystene/Denton.
These cities have some of the best rent/price ratios I see now and some of the best chances for growth.
Austin likely very expensive price/rent ratios....Memphis can be a tough city....
Atlanta and Nashville I would think are good growth prospects and balanced opportunity.
Charleston....no idea. Nice city.
How did you narrow down to those cities?
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Calvin Cheong
OP
Calabasas, CA · Member since 2015 · 11 posts · 15 votes
3y
@Bruce Lynn Thanks Bruce for this helpful information. Just started my search and want to focus in the Southeast region where the dollar stretches further than Southern California where I'm based. Have been bullish on the TX and GA market given population growth and large multinationals moving down there given the favorable tax environment. Also, highly educated population and job growth seems good for the foreseeable future. I work in Tech and have seen many companies and investors flock to the region. I may have missed the boat on Austin but think there are still opportunities in Dallas/Atlanta. Charleston, Nashville, Memphis - love the feel and culture of those cities and would be looking for stable and moderate appreciation and would be looking in the CBD areas for the these cities. Much appreciated.
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Garrett CrosbyPro Member
Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
3y
@Calvin Cheong - we should connect. I’m actually looking into a few multi families as well. I have several clients local to you. Always love talking through these strategies and also getting people set up in properties out here in CA. :)
Personally I’m invested in NC currently - but have hit a point of wanting to scale up as well.
[email protected]
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Luka Milicevic
Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
3y
@Calvin Cheong
What are your goals with your multi fam purchases?
Speaking for the Nashville market-if you're looking for cash flow you would need to put a massive down payment to get cash flow. It's not a cash flow market-if you're investing here in long term rentals it's to park money in a safe market.
You will have better luck in the surrounding areas outside of the city. Still won't really cash flow, but will be better numbers, and cheaper than buying close to the city.
2 Reply
Bob S.
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
3y
Quote from @Calvin Cheong:

Narrowed down to multi-family. Looking at Dallas, Austin, Atlanta, Nashville, Memphis, Charleston. Be interested in hearing from folks with direct experience in those markets. Would love some suggested zip codes to run some research. Hold period 5-7 years. Thanks!

Those areas are very expensive, and IMO will see a correction. If you are cash there are much better overall returns in the MID WEST, 10% + net caps are to be had at about 40k per unit. Its all about knowledge and your team.
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Jordan MoorheadBusiness Member
Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
3y
@Calvin Cheong everyone will tell you their market is the best, do your research too! I like Austin because we have tons of job growth and lots of rental demand here. We also have a fair amount of multifamily!
[email protected]512-888-9122
The Moorhead Team5140 Reviews
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Steve Kontos
Investor · Great Neck, NY · Member since 2016 · 679 posts · 467 votes
3y
@Calvin Cheong
Those areas are not bad but the "cat's out of the bag" in terms of finding assets with true value add. If you do not have an in, it'll be hard. I recommend searching miles away from those areas into lesser known towns. When researching, I highly recommend also talking with successful out of state investors this way they can answer any specific questions you have because out of state investing is not black and white. It's a very relationship driven business when you invest out of state.

1 Reply
Darius McKeller
Real Estate Agent · Atlanta, GA · Member since 2018 · 22 posts · 12 votes
3y
Good areas in Atlanta is Southwest Atlanta/South Fulton area. Alot of multifamily properties in those areas. East Atlanta, specifically Edgewood/Little 5 points/East Atlanta Village, have alot of multi properties as well but they're more expensive than the Southside.
2 Reply
Marc S.
New to Real Estate · NY · Member since 2015 · 119 posts · 36 votes
3y
@Garrett Crosby I've been looking at Charlotte MFs. Are you finding that you are still getting good purchase prices? I've yet to get my 1st property. I have made contact with an agent there and haven't gotten many good deals. The asking prices don't even come close to the 1% rule.
1 Reply
Aaron Gordy
Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
3y
The ROI's that folks are seeing in Austin is incredible. There are plenty of naysayers that keep on saying that Austin has run its course. I stand by the side of history. The Austin metro has been growing substantially over several decades.
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Calvin Cheong
OP
Calabasas, CA · Member since 2015 · 11 posts · 15 votes
3y

@Aaron Gordy Agreed, have narrowed down my market to Dallas and Austin. Not looking for a quick flip and can weather the macro headwinds. YoY home prices in Austin have come down around 16% which I think is potentially a good time to be bargain hunting! They said the same thing about Southern California and Silicon Valley 10 years ago. Man, folks that bought 10 years ago making bang right now! Bullish Austin given influx of MNCs and Investors, not just real estate investors, but VCs and PEs.
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Aaron Gordy
Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
3y
@Calvin Cheong Hey Calvin. Not sure where you got the info from about the 16% drop. The stats that I have from the latest Austin board of Realtors for the entire metro is in the positive. In fact, 36 zip codes has very good appreciation. Quite a few are still double digit appreciation...but tbh the days on market is a little longer than what they had been this time last year. The downtown market is on fire with a ridiculous appreciation YOY but there is no way that one can come close to cash flowing or make sense of it from an investment standpoint, imo.
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Garrett CrosbyPro Member
Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
3y
Quote from @Marc S.:

@Garrett Crosby I've been looking at Charlotte MFs. Are you finding that you are still getting good purchase prices? I've yet to get my 1st property. I have made contact with an agent there and haven't gotten many good deals. The asking prices don't even come close to the 1% rule.

Hey Marc - I've actually been having some luck with SFH in Fayetteville. Most of my properties there have a 400-600 cash on cash return. Getting a little tighter because of interest rates, but I would be happy to talk to you more about it if you want. I have an agent I used for all my purchases. He knows his stuff. Only sends me cash flowing properties. Top notch investor.
[email protected]
2 Reply
Marc S.
New to Real Estate · NY · Member since 2015 · 119 posts · 36 votes
3y
@Garrett Crosby. That sounds great Garrett. I would definitely love the opportunity to talk to someone with a great reference.
0 Reply
Laura ShinklePro Member
Realtor · Charlotte, NC · Member since 2017 · 357 posts · 292 votes
3y
CLT is not a great place for multifamily. There's not much inventory in that space, they are not a common asset class.
1 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
3y
Chicago has class A/B areas where you can cashflow with 700+ credit tenants. It's not as cheap a price point as some areas but the deals work well in real life as well as on paper as the tenants are great.
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Calvin Cheong
OP
Calabasas, CA · Member since 2015 · 11 posts · 15 votes
3y
@Aaron Gordy Sorry, I meant median sales prices are down from the high a year ago. Really looking here more for appreciation and I'm not going to use to much leverage and am bullish long-term on Austin. Thanks!
1 Reply
Ashton Hines
Real Estate Agent · Carrollton, TX · Member since 2022 · 29 posts · 19 votes
3y
I would give a plug for the One The Market podcast. They hammer economic trends and often discuss the lack of units in single and multi-family. A positive inflow of population and a business and landlord-friendly environment are the base. One way to think about Austin is as a forerunner to pushing a renter economy more and more. Lack of affordability in homes will drive people to either rent or become creative with their living arrangements.
That being said there seem to be a lack of units in general and math is math. If you can make the cashflow work by getting a good buy and adding value with good management then it's a good investment. The debate might be long term appreciation and potential compression of cap rates if you pick the perfect area. I don't think you can go wrong in either place if the fundamentals are there.
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Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
It is tough to cash flow in Austin, I invest an hour north of Austin, Killeen Texas. Great cash flow up there
2 Reply
Sam McCormackBusiness Member
Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
3y
@Calvin Cheong
Recommend Cincinnati, OH!
[email protected]859-443-4952
Sam McCormack Realtor
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Levi BennettPro Member
Real Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes
3y
Quote from @Marc S.:

@Garrett Crosby I've been looking at Charlotte MFs. Are you finding that you are still getting good purchase prices? I've yet to get my 1st property. I have made contact with an agent there and haven't gotten many good deals. The asking prices don't even come close to the 1% rule.

MF is not normal here, it's nothing like up north. I think a lot of investors from more dense cities assume Charlotte has a higher density but it really doesn't. Typically, MFs here trade between 3.5% - 6% cap. To compound frustrations, already very low inventory is exacerbated by people all over the country that see Charlotte on the internet as a good place to invest and think they can apply what they know about MF to Charlotte.. it doesn't work, yet (literally) 10s of thousands of new investors look here every year for the same couple of hundred MF properties. To give you more perspective, most of these owners get 1-5 offers PER DAY since 2017. You will not find a "good deal" in MF in Charlotte without enormous luck. If you want 1% rule in the Carolinas, invest in short term rentals.
3 Reply
Levi BennettPro Member
Real Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes
3y
Quote from @Calvin Cheong:

Narrowed down to multi-family. Looking at Dallas, Austin, Atlanta, Nashville, Memphis, Charleston. Be interested in hearing from folks with direct experience in those markets. Would love some suggested zip codes to run some research. Hold period 5-7 years. Thanks!

I notice you picked all southern cities with very low density (low MF inventory). Usually MF trades at very low cap rates in the South. Just curious why these cities? Was it related to MF performance specifically or overall economic performance?
0 Reply
Calvin Cheong
OP
Calabasas, CA · Member since 2015 · 11 posts · 15 votes
3y
Quote from @Levi Bennett:

Quote from @Calvin Cheong:

Narrowed down to multi-family. Looking at Dallas, Austin, Atlanta, Nashville, Memphis, Charleston. Be interested in hearing from folks with direct experience in those markets. Would love some suggested zip codes to run some research. Hold period 5-7 years. Thanks!

I notice you picked all southern cities with very low density (low MF inventory). Usually MF trades at very low cap rates in the South. Just curious why these cities? Was it related to MF performance specifically or overall economic performance?

Looking in the South where I’m long term bullish on economic performance. Given pandemic, have seen a lot of my friends from CA, NY move to the South where cost of living is much better and housing is affordable. Many of these moves have been friends in the tech industry and have seen an influx of VC investments into these markets as well. Further, I’ve seen an exodus of corporations leaving CA for TX due to the more favorable tax climate and educated work force. $1mm gets you 700 sqft in Santa Monica. What I’ve seen in the South for $1mm is quite remarkable and given the right areas (I’m still discovering) could be enticing for single folks and/or families starting out where remote working is now the norm. Just my two cents and I may be wrong.

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John WilliamsBusiness Member
Property Manager · Clarksville, TN · Member since 2018 · 443 posts · 210 votes
3y
Check out the hidden gem of Clarksville, TN (near Nashville). Clarksville is where Cashflow meets Appreciation and has some great mid/long-term growth prospects!
[email protected]931-272-3065
Rent My Home - Property Management4.8207 Reviews
Website View Page
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Levi BennettPro Member
Real Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes
3y
Quote from @Calvin Cheong:

Quote from @Levi Bennett:

Quote from @Calvin Cheong:

Narrowed down to multi-family. Looking at Dallas, Austin, Atlanta, Nashville, Memphis, Charleston. Be interested in hearing from folks with direct experience in those markets. Would love some suggested zip codes to run some research. Hold period 5-7 years. Thanks!

I notice you picked all southern cities with very low density (low MF inventory). Usually MF trades at very low cap rates in the South. Just curious why these cities? Was it related to MF performance specifically or overall economic performance?

Looking in the South where I’m long term bullish on economic performance. Given pandemic, have seen a lot of my friends from CA, NY move to the South where cost of living is much better and housing is affordable. Many of these moves have been friends in the tech industry and have seen an influx of VC investments into these markets as well. Further, I’ve seen an exodus of corporations leaving CA for TX due to the more favorable tax climate and educated work force. $1mm gets you 700 sqft in Santa Monica. What I’ve seen in the South for $1mm is quite remarkable and given the right areas (I’m still discovering) could be enticing for single folks and/or families starting out where remote working is now the norm. Just my two cents and I may be wrong.

So you're right about all of that. The problem that most investors don't account for in the South is that density is significantly lower than other places in the country, particularly the far West, midwest and up North. This means that MF properties are VERY rare, and very competitive. If you're looking to do a 20-30 year hold, it makes more sense, but they typically don't cash flow for quite some time unless you're buying 200+ units at once. Small MF is just very competitive. I have another comment about this. Overall the market is amazing here, but it's not amazing in the MF space specifically. Is there any other strategy you're considering?
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