Best markets to buy multifamily in 2016: A round-table discussion

[Brian Burke]

At the beginning of each year I take the time to research and reflect on various markets throughout the country so as to provide a road map to my acquisition search for the year.  As an active buyer of apartment complexes of 100+ units, market selection is very important to a successful outcome.

For the last seven years I’ve focused heavily on the major Texas markets, and that approach has been good to me, but 2016 is the year that I see a stronger potential to branch out to other markets as well.

To that end, I’ve researched population & job growth, wage growth, net migration, costs of doing business, median home prices, housing affordability & starts, rent/cost of ownership ratio, rent as a percentage of household income, vacancy, rent growth, and other economic and demographic indicators.  This research has led me to develop this list of MSAs that I believe may be good markets in which to invest, particularly in multifamily.  In alphabetical order:

• Atlanta
• Austin
• Cape Coral / Fort Myers / Naples
• Charlotte
• Dallas
• Denver
• Nashville
• Orlando
• Portland
• Raleigh
• San Antonio
• Seattle
• Tacoma

There are two cities that moved up in the Milken Institute’s best performing cities index but didn’t rate all that high in ULI’s Emerging Trends in Real Estate report.  So I’m conflicted.  Not sure if I should consider them or not. Those are:

• Boise
• Charleston

Then, there are these three cities that seem to have strong favorable indicators but have declined in some rankings over last year.  Those are:

• Columbus
• Indianapolis
• Minneapolis

And finally, there are several markets that that still don’t have the most favorable numbers, but are amongst the biggest gainers in the Milken Institute’s best performing cities index, which could spell opportunity to get in early (well, relatively speaking anyways…early was actually more like 2010).  They are:

• Eugene
• Fresno
• Las Vegas
• Modesto
• Reno
• Salem
• Salinas
• Spokane
• Stockton

Noticeably absent are what some are calling the best markets in the country, and the data is there to support such a claim.  San Francisco, San Jose, Los Angeles.  I just see these markets as having become highly inflated and further gains are less certain in the near term.

Now for the round-table discussion.  Locals, and active investors in the named markets, what are your “boots on the ground” opinions?

And every city has a story, such as “the north side is doing great but the south side, not so much” or “XYZ is about to build a big plant on the northeast side”.  What’s the story of your market?

And for others, if I didn’t name your favorite market, what is it, and why?