Influx of multifamiles in the midwest

12 Replies

I have been browsing the national market recently looking for multifamily properties and I have noticed the abundance of duplexs, triplexes, etc in the states of the midwest. They all seem to be  reasonably priced and in fairly good areas. I understand it is a different  market then what I am used to but 100 to 200 thousand for a duplex or triplex seems like a pretty good deal. Does anyone know why it is so much easier to find a multifamily in this region than anywhere else?  

What markets specifically are you looking at? Prices will vary widely in the stronger midwest markets. Also, property taxes in many markets (especially Chicago and some Ohio markets) are absolutely brutal, which drives down the overall price as cash flow gets constrained. 

My opinion is actually the opposite, 2-4 family stuff that hits the open market is actually bid up aggressively and there are very few deals in the <$1MM space.

@Phil McAlister I have been looking at properties in Connecticut, Michigan, Pennsylvania and many other states in the Midwest . I have noticed hundreds of listings in the first 3 that are listed for 150 to 250 range. However the prices aren’t what I have questions about. I just want to know why this region has significantly more small multifamily properties than anywhere else in the country. It seems like there is a duplex on every other block.

@Blaine Alger

Maybe because the states built houses earlier? I know a lot of the houses here were built in the early 1900's, I am not sure how many giant complexes were built back then.

@Blaine Alger There's so much more than a price when considering an investment, there're expenses, potential for appreciation, the neighborhood, the potential tenants, etc. Consider starting with a single market - evaluate it for supply and demand and then decide whether you'd want to stick to it or move to the next market to look for your investment.

@Blaine Alger Yes correct, a lot of our houses were built in 1800's-1900's. I consider anything 1950 and up "new" around here... And people can't believe it...haha. 

But my question is, you live in Waco TX? Why not invest in Texas where all the positive basic job growth is? The only positive for CT is Fairfield County, proximity to NY City/Boston, colleges, and the 4 seasons. Otherwise the job and population demographics are showing a bleak future for residents. 

Just asking:)

@Scott Hollister I think you hit on it. I just relocated to Waco. Austin is busting at the seams! We are on the I-35 corridor right between Austin and Dallas. Texas is producing half of the new jobs in the country. When I was looking to relocate, half of everything I saw were duplexes. The rental market is strong here and not too difficult to do math on. I’m trying to start wholesaling, which I had just started doing in Louisiana before moving here. My belief is that there is a lot of population influx due to growth, jobs, low taxes, etc. and not enough houses to go around. Not sure how that extrapolates to the rest of the Mid-West. It’s a good question. Just my two cents, Scott.

Thanks for the response @Scott Hollister but its not that I don't want to invest in Texas. Its just that I am researching other areas to get a better understanding of what markets are doing across the country. When the times come I will most likely invest in Texas but I would still like to have other options. 

The thing that I find fascinating about the midwest is the abundance of multifamily compared to the south. Maybe I am looking in the wrong place but from my research online I always come to the same conclusion.  

@Blaine Alger what are your resources for research? Curious. I like to look at Texas A&M Real Estate Center. There is a treasure trove of data there that is based upon the entire U.S. Thanks

@Aaron Gordy I have just been using and other such sites that give limited MLS. It does not have a ton of information but it gives me a good idea of what is available in certain areas. I will definitely give your suggestion a try, Thank you.

@Blaine Alger They used to be much cheaper even... but now investors are starting to post stuff on the MLS and out of state investors see how [relatively] cheap the deals are... and they're driving prices up. They're still high yield in comparison, but things are on the up-and-up so either get in on wait for slower times.

DM if you're curious :) 

I don't look a ton for small properties, but in Minneapolis they are near impossible to find. In Cincinnati and other markets that I am in they are a little more prevalent, but most people in those markets are still complaining about inventory. 

One thing to remember is that these are older markets that built a lot of 2-4 unit properties. 

@Blaine Alger here is my best advice that I wish I knew earlier in my career. 

Follow the population and job growth, which is vague so lets specify. You are looking at the economy and the impact of the multiplier affect. Let's say a local employer creates 1 job, and then that job creates an additional spin of or 1.5 to 2.5 jobs. All of this adds to the local taxes collected, retail sales, etc. But not just any job will do...

"The type of primary industry jobs located in the economy determines the quality of the economy."

You are looking for primary jobs coming to the area with an higher average pay than the average area wage. 

You are also looking for emerging real estate markets, tracking the data year over year to compare it. (Job and population growth huge factor in this)

You want a diversified area with multiple primary industries. (Be careful of oil towns in Texas) 

To summarize, Texas had the largest % job gains among large areas since 08. My advice is stick to sound investing principles, which you can learn by networking, reading, forums, and education. And look where no one else is looking right now...

You have a great market, all you have to do is become an expert in it now:)

Book/Free PDF to read: 

Emerging Markets

The Flow of Money