Evaluating 15–40 Unit Development Markets (AZ, TX, FL, Midwest) – Seeking Pro Insight

Multi-Family and Apartment Investing
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Evaluating 15–40 Unit Development Markets (AZ, TX, FL, Midwest) – Seeking Pro Insight

Benjamin J Thompson
Chicago, IL · Member since 2019 · 17 posts · 10 votes

I’m looking for perspective from experienced developers and operators as I evaluate which U.S. markets make the most sense for small-to-mid scale multifamily development—roughly 15 to 40 units—over the next phase of my investing.

I’m intentionally not locked into a single market yet. Arizona is one area I’m actively exploring (with a visit planned in February), but I’m also looking closely at Texas, Florida, parts of the Midwest, and other secondary or tertiary markets where development fundamentals still make sense.

For context, my background is primarily on the ownership and operations side:

  • I’m a Marine Corps veteran, PMI-certified Project Manager, with a BA in Technology and an MBA in Business Management

  • I currently own and operate 4 multi-unit and mixed-use properties in Chicago

  • I have significant hands-on experience with Section 8 / voucher-based multifamily, inspections, compliance, tenant management, and long-term operations

  • My mindset is long-term hold, not quick turn or merchant build, possibly move-into one and house hack, while managing the others. 

As I explore development (or co-development) opportunities in the 15–40 unit range, I’m trying to understand—from people actually doing it—where the balance of risk, complexity, and upside is most rational today.

I’d value professional insight on questions like:

  • Which markets currently make the most sense for small-to-mid multifamily development, and why?

  • Where do entitlement, zoning, or utility constraints (water, impact fees, infrastructure) become deal killers vs. manageable?

  • How do markets like Arizona, Texas, Florida, and Midwest metros compare in terms of:

    • Cost per door (2025–2026 reality)

    • Entitlement timelines

    • Labor and construction volatility

    • Long-term rent durability (not just short-term growth)

  • For someone with deep operational experience, which markets best reward disciplined, conservative underwriting?

This is not a deal pitch, and I’m not seeking brokers or wholesalers. I’m deliberately early in the process and want to pressure-test assumptions before committing capital or geography.

If you’re actively developing, operating, or investing at this scale and are willing to share perspective—publicly here or privately—I’d appreciate the insight. Even directional feedback is helpful.

Thanks in advance for thoughtful responses.

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Clark Thornton
Property Manager · Orlando, FL · Member since 2025 · 110 posts · 50 votes
8mo

It feels worth asking why you want to go the new development route as opposed to simply purchasing a cash flowing multi-family property?  

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  • Clark Thornton
    Property Manager · Orlando, FL · Member since 2025 · 110 posts · 50 votes
    8mo

    It feels worth asking why you want to go the new development route as opposed to simply purchasing a cash flowing multi-family property?  

    1Reply
  • Benjamin J Thompson
    OP
    Chicago, IL · Member since 2019 · 17 posts · 10 votes
    8mo

    That’s a fair question, and one I’ve been pressure-testing myself.

    I’m definitely not committed to new development for its own sake. I’m evaluating it as one of several tools, alongside acquisition, based on what I’m seeing in today’s market.

    The reason development is even on the table is that in some submarkets, pricing on “cash-flowing” multifamily has detached from fundamentals—cap rates are compressed, sellers are anchored to 2021 pricing, and the margin for error on older assets (capex, insurance, taxes, deferred maintenance) has widened. In those cases, I’m effectively buying someone else’s problems at retail pricing, which is just not attractive for a savvy investor. 

    Development can offer a few advantages when executed selectively:

    • Basis control and modern systems (lower near-term capex risk)

    • Ability to design unit mix and amenities to current demand

    • More predictable operating costs in the first several years

    • Potential to create yield where acquisition spreads are thin

    That said, I’m fully aware development introduces its own risks—entitlements, timelines, construction costs, lease-up risk, and capital exposure—so I’m only considering it where:

    • demand is proven,

    • supply is rational, and

    • the numbers work without aggressive rent growth assumptions.

    If I can buy a well-located, truly cash-flowing property at a sensible basis, I’d absolutely do that instead. My goal isn’t “development vs acquisition”—it’s finding the best risk-adjusted way to scale units in today’s environment.

    I’d be genuinely interested in your take: in your market, are you seeing better risk-adjusted returns from buying existing assets right now, or are you seeing opportunities where development actually pencils cleaner? I'm at a point where I want to keep growing, and I'm happy to cash out my current portfolio to go bigger, however, the numbers have to make sense. I invest where the numbers are verifiable, not aspirational.

    I approach real estate as a long-term operating business, not a short-term trade. Real estate rewards consistency more than cleverness. I'll take the tortoise over the hair any day of the perceivable future. :-)



    1Reply
  • Clark Thornton
    Property Manager · Orlando, FL · Member since 2025 · 110 posts · 50 votes
    8mo

    Well its good that you have patient money, but obviously the timeline on recovery is significantly longer on new development than purchasing existing assets. Nobody has a crystal ball, and there are fewer unknowns on existing assets than new development, and in that sense new development is inherently riskier. If you are building to hold indefinitely, new development is certainly still a viable option. But if you are asking which carries more risk: new development.

    Not to mention, would you be financing new development? 

    1Reply
  • Benjamin J Thompson
    OP
    Chicago, IL · Member since 2019 · 17 posts · 10 votes
    8mo

    That’s a fair assessment, and I largely agree with your framing.

    All else equal, new development does carry more risk than acquiring existing assets—longer recovery timelines, more variables, and fewer data points early on. There’s no dispute there. That’s exactly why I’m not approaching development as a speculative play, nor as a replacement for acquisition, but as a situational option where the risk is compensated by basis control and long-term durability.

    My lens is very much long-term hold. I’m underwriting deals to survive:

    • slower lease-ups,

    • conservative rent assumptions, and

    • higher-than-expected costs,

    without requiring perfect timing or aggressive appreciation to work.

    On the financing side: yes, financing structure is a critical filter. I’m not interested in highly levered, short-duration construction debt that forces an outcome. Any development I’d pursue would require: conservative leverage, sufficient reserves, and flexibility on timeline, so that the project can be operated through market cycles rather than rushed to exit.

    To your point about existing assets having fewer unknowns—that’s exactly why I’m still very open (and arguably biased) toward acquisition where I can buy documented cash flow, operating history, and known risk at a sensible basis. If I can acquire an asset where the numbers work today, I’d choose that every time. However, that's been my norm, and I do think there are areas that have immense opportunity for development, especially considering data centers based around re-industrialization and AI at present. 

    For me, this isn’t a binary “development vs acquisition” decision. It’s about risk-adjusted execution:

    • buy existing assets when pricing reflects reality,

    • consider development only where demand is proven, supply is rational, and the deal works without heroic assumptions.

    Out of curiosity, in your experience right now, are you seeing better risk-adjusted returns in acquiring existing assets—seems like that's the case, or are you finding that pricing has forced you to get more creative to make deals pencil?

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  • Michael K GallagherBusiness Member
    Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
    8mo

    I've not worked specifically on a multifamily development project, but have worked on many retail/medical development projects.  

    As far as choosing a market and the general site selection there is a lot of data and noise out there.  

    we generally focus on grocery stores as "center points" for a "market" or "zone".  we usually prioritize metrics like private insurance numbers, overall population, % of population in psychographic profile we are searching for (generally "YXB" from experian, aka "young families), FBI crime statistics, and then we generally layer in competition as well and have a "max competitors" in that zone.

    This allows us to go through the market we are considering, or state, or multi states as in your case, apply a systematic "prioritization" and then we get granular and look at each market and area that "qualifies" in more detail.

    The largest benefit to going with the midwest over your other markets is the long term livability and survivability in those climates.  Additionally as water becomes more and more scarce and a real issue, the worlds largest source of fresh water being the great lakes is certainly a benefit to having nearby in the apocalyptic hellscape of AI we are headed into (only being half facetious)

    [email protected]614-362-2231
    1Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    8mo

    I really like @Michael K Gallagher point about there being a lot of data noise out there.

    I'd find your specific key metrics that matter most and lean into those.  

    For me, the hard-to-measure data point is the team you can build across different markets.  Find the right people will make all the difference!  I am a midwest fan only because I am here in Chicago, love all of our old inventory, price points from A to Z, and both cashflow & Appreciation plays...

    [email protected]
    Quality Builders4.966 Reviews
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