Determine market for multifamily

9 Replies

How do some of the experienced investors select a market for multifamily. I imagine it would be different than for a SFH. For instance, school districts may not matter as much? Would like a higher renter ratio, etc? What are the most important parameters?

People living in apartments want the same things as you do, they just can't always afford it. So yes, school districts still matter. But sometimes they'll have to deal with what they can afford. What they can't afford though is to not have a job. So the important parameters will be job growth, which in turn drives population growth, which in turn drives occupancy for your apartments.

Key Metrics to market cycle and why it’s all about Timing

– Job Growth
– Population Growth
– Affordability

– Supply/Demand

361-695-1943

@Todd Dexheimer  

Thanks, that's an excellent article, it taught me more than I've learned in several books I've read!

Which would the more seasoned investors out there prefer for someone interested in smaller multifamily units such as 3-4 units? This would be my very first property.

1.  A more expensive property ($450-500K) with less return (due to higher price point) in an area that has job growth and population growth, up and coming popular scene, cap rate around 5%, about a 1.5hr drive from me.  

2. a medium expensive property ($300K) in area with good schools, cap rate about 7%, local to me (15min), low crime, nice town, stagnant or slightly decreasing job growth and population

3. A lower priced property ($150-200K) in a B/B- area with slightly more unemployment, decreasing population and decreasing or stagnant job growth, cap rates from 8-10+%

I guess I am trying to figure how important population growth and job growth are to picking a market. Areas near where I live are declining so I would have to go a couple of hours away to find the good markets. And prices are more expensive. So I am wondering what would be a better strategy. 

I am interested in long term buy and hold. Thanks

For me it's all about economic drivers of the area.

Is it a one employer town? Are businesses moving in or out of the area? What is the median/average household income? Major employers/industries, etc.

It's important to understand the risks and potential of the area's economy.

Do most of you buy moderately to minimally distressed properties versus "turn key" ready to rent properties? If so, why? Wouldn't you save the costs for rehab by buying the turnkey properties?

Thanks so much for all the advice

@Vika Bha

I'd be happy to talk you about that. Shoot me a message

Originally posted by @Vika Bha :

How do some of the experienced investors select a market for multifamily. I imagine it would be different than for a SFH. For instance, school districts may not matter as much? Would like a higher renter ratio, etc? What are the most important parameters?

 Personally my thought has always been to go as close to home as possible. As I live in a very investor friendly market that has ample opportunity for cash flow I didn't have to give it another thought after that. What I later found out (& subsequently built a business to fill the niche need of) is that many investors don't have that luxury. Many need to go national to obtain cash flow. After that folks tend to look at neighborhood quality, job growth & school systems.

James Wise, Real Estate Agent in OH (#2015001161)
216-661-6633

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