Best states for Multifamily 50+ units! Share your experiences

27 Replies

Investing in higher job growing states is smart and important. With what is happening with the online companies and remotely controlled businesses, many companies are leaving the expensive cities such as San Francisco, NYC and LA and moving to other states where their employees can afford a better living as their living expenses (including rent) is way more affordable.

Share your success experiences.

Thanks,

Dr. Bender

  Anywhere in Central Florida you can do very well. The job growth is through the roof with many large company's stationed threw out the area. And people are steady migrating to FL everyday. The majority of my business in FL was people who where transfer/retiring in Florida because there are no state taxes only federal. And property taxes are extremely low.

Lots of great high growth markets, but obviously cap rates will be much lower in those markets.  I invest in the Milwaukee, WI area, not the greatest growth market but good yield.  Eventually I'd like to expand into the growth markets though. 

I agree. I live in NYC and have built up a portfolio in Philadelphia. There has been strong growth in Philly and also a lot of money leaving New York. Especially after the landlord laws changed last year, it just makes sense to go with other markets. I'm also looking at markets in the South East. The population and job growth in those markets are very strong (Florida and the Carolinas are great examples of that). You just can't find a 50-unit building with attractive cap rates in NYC or even Philly these days.

We are seeing explosive growth here in Idaho as the rest of the nations starts to figure out what you guys are saying about larger cities. We are also seeing job growth that many of the other areas that are "affordable" for investors just are not seeing. Lack of job growth makes for a scary situation when the music stops and this economy cools down. So while we may not have 8 CAP's we have 11-14% rent growths that are the star of the show right now.

https://www.ktvb.com/article/n...

https://www.idahostatesman.com...

@Adam Fleck why would they be comparing cap rates on a 3 unit building and not market value?? Interesting. The standard of valuation changes from residential to commercial. 


I've been seeing a lot of investors be successful in Detroit, actually. It's a matter of knowing Sec 8 and having solid PM. If you can do that, I know my clients have been seeing success there (I funded two 24 unit buildings for one client, bought them both within months of each other).


@NA Bender

Kansas City has been exploding over the last few years. Large multi is a hot commodity but cap rates depending on neighborhood is 7%-15% on average. Cerner is our largest employer and they have been growing rapidly. Many out of state money is being poured in.

@NA Bender the best market is the one you know or have boots on the ground in already. It's also important for the market to be semi-close or easily accessible for you by plane. Real estate is hyperlocal and every growing market has good and bad pockets. If you invest in a market where jobs are moving to, so will the people. I'd look for larger MSA's and landlord-friendly states.

Originally posted by @Zaid Bender :

@Manny Cirino what cities in Florida you like to invest in?

Thanks,

Lakeland, Winter Haven, Davenport, Plant City, Tampa, Brandon, Orlando, Winter Park, Winter Garden

This is pretty much Central Florida with main 3 large cities being Lakeland, Tampa and Orlando.

 

It very well could be. I lived in Lakeland and worked the surrounding areas, so I could speak to that very well. Jacksonville was about a 3 hour drive for me so rarely did I  go out there far. But when I did I notice it is a split city have. Has it's good parts, but the majority seemed to be run down. I guess that means more room for value add opportunities.

Don't focus so much on a state, but on an exact market and sub markets within. I can tell you to invest in Ohio, but there is a big difference between Toledo, Cleveland, Cincinnati and Columbus. I can even tell you to invest in Cincinnati, but there is a massive difference between Westwood, Walnut hills and Hyde park. 

Get to know the city that you prefer, then figure out the best sub markets within

Originally posted by @Zaid Bender :

@Todd Dexheimer Thank you, that is true. However, there is a certain migrations and job growth in some states more than others. On the microlevel though, definitely cities varies. Do you invest in Ohaio only? 

I used Ohio as an example. I could have used any state and the same holds true. I get net migration, but that tells us very little. You can have a state that has very little or negative growth, yet a few cities within that have very healthy growth. You can also have states with good population growth, yet cities losing population. Look at Alabama. The state is gaining population, Huntsville is seeing great growth, but Montgomery is losing population. 

@Zaid Bender It depends entirely on long term strategy. Do you want to keep buying in one market or be spread out across multiple? Do you want appreciation or cash flow or both? I would select a growing but affordable city like KC, Indianapolis, Raleigh area, or Fort Worth. It is steady, nice, increasing and still affordable.

Originally posted by @Todd Dexheimer :

Don't focus so much on a state, but on an exact market and sub markets within. I can tell you to invest in Ohio, but there is a big difference between Toledo, Cleveland, Cincinnati and Columbus. I can even tell you to invest in Cincinnati, but there is a massive difference between Westwood, Walnut hills and Hyde park. 

Get to know the city that you prefer, then figure out the best sub markets within

 I totally agree with Todd. Investing is down to the sub-market and even down to the neighborhood level.

One of my staff members asked me why I was not interested in a 22-unit building that is only selling for $30K/door. There is a $100/month/u upside with probably a $5,000/unit property improvement. I said "NO" because the neighborhood is a bordeline D+/C- and the $100/mo/u is pretty much all the upside. With better deals I can find in better markets, why be satisfied with that?

What you want to invest in is a growing community. I like to buy at the border of a good community and a bad community and knowing the market intimately, allows me to know where the good part is growing into and that's where I buy.


Not all job and population growth is created equal.  A city or submarket that is growing fast on paper, may not be creating diverse or high paying jobs that are needed to help the region to endure the next drop in the economic cycle, or even a disruption to a specific industry sector.  A region's population and job growth is a great initial indicator to look at as a first step, but then you need to drill down deeper by examining other local variables such as HHIs, GMPs, diversity of economy and other factors that will provide perspective on the vitality of the area's economy.  

For example, the bottom 10 metros for GMP/capita (measurement of a metro area's output based on national prices for the goods and services) of the largest 53 metro areas in the US, include a few Rustbelt cities, but surprisingly the list over indexes in superstar growth metros in the Sunbelt. So, while many of these cities have impressive job and population growth on paper, the local economies are more fragile than they appear on the surface, which is a risk you'd need to factor into your underwriting both in terms of rent loss and loss of asset value during a downturn. It's smart to look for growth, but you need to make sure that growth is sustainable over time.


Bottom 10 Metros for GMP/capita (lowest first)

  1. Riverside, CA
  2. Tucson, AZ
  3. Tampa - St. Petersburg, FL
  4. Las Vegas
  5. Jacksonville, FL
  6. Providence, RI
  7. Phoenix, AZ
  8. Buffalo, NY
  9. Rochester, NY
  10. Orlando, NY




Originally posted by @Zaid Bender :

Investing in higher job growing states is smart and important. With what is happening with the online companies and remotely controlled businesses, many companies are leaving the expensive cities such as San Francisco, NYC and LA and moving to other states where their employees can afford a better living as their living expenses (including rent) is way more affordable.

Share your success experiences.

Thanks,

Dr. Bender

 

Could someone please recommend a good or very reliable property management company in the Indianapolis Indiana area. A company that does small commercial real estate such as duplexes, triplexes, quads and any multifamily up to 20 units. Thanks.