Not all multifamily real estate markets are equal: where to invest

Multifamily properties—like apartment complexes and student housing—are one of the strongest asset classes for commercial real estate investors. However, rising interest rates, shifting supply chains, and affordability pressures are redrawing the map of where capital can work most effectively.

Not every multifamily real estate market is delivering right now. Some metros are experiencing rapid rent growth and a decline in vacancy rates, while others are grappling with oversupply and affordability issues. For investors, the difference between those markets is the difference between steady income and stalled returns.

We’re taking a look at the markets offering great value in the second half of 2025, and flagging the ones where investors should tread carefully.

The state of multifamily real estate in 2025

In our 2025 market update, we mentioned that smart investors are finding value in multifamily properties. Across the country, this is still the case. Household formation is climbing, but high mortgage rates are keeping a lot of would-be buyers in the rental pool. Overall, vacancy rates have held relatively stable since the first half of 2025 (dropping slightly from 7.1% to 7.0%, according to the U.S. Census Bureau).

At the same time, the construction pipeline that surged in 2023 and 2024 is beginning to taper, easing some of the oversupply concerns in top metros. Rent growth has cooled from its pandemic-era highs but is still advancing at a modest, sustainable pace in many markets.

Beneath those averages, though, the story diverges. Some Sun Belt metros that saw heavy development are now wrestling with rising vacancies and flat rents, while overlooked Midwest cities and some coastal submarkets are delivering steady absorption and healthy yields.

For investors, separating overheated markets from those quietly compounding value has become the defining challenge of 2025.

Multifamily markets showing the strongest value

These key markets are proving more resilient than others, offering investors a balance of rent growth, occupancy stability, and manageable supply pipelines.

1. Midwest stability: Cincinnati, St. Louis, and Columbus

The Midwest offers some of the most reliable returns in multifamily property investment. Cities like Cincinnati, St. Louis, and Columbus benefit from relatively affordable real estate, diversified local economies, and a steady demand for rental property.

Acquisition costs are well below coastal markets, giving investors a wider margin for error and better risk-adjusted yields. With less new construction than the Sun Belt, these markets are less exposed to oversupply—making them attractive for long-term stability.

2. Southeast momentum: Charlotte and Raleigh

Raleigh (one of our top 9 markets for real estate investment in 2025) and Charlotte are two of the fastest-growing metros in the U.S. Powered by people moving in from higher-cost coastal states, they combine pro-business regulatory environments with expanding employment bases in finance, tech, and healthcare.

Although lots of construction is taking place, demand has consistently outpaced deliveries, keeping rent growth resilient. Investment opportunities in these metros offer momentum and scalability, as long as you’re careful about which submarket you purchase your investment property in.

Some neighborhoods, like Uptown Charlotte and downtown Raleigh, are facing heavy competition and softer rent growth. Others, especially suburban areas tied to job hubs like Research Triangle Park, are absorbing new supply more smoothly. Remember to do your research before jumping in.

3. Northeast strength: Northern New Jersey

Northern New Jersey stands out as one of the nation’s rent-growth leaders, benefiting from its proximity to New York City, strong transportation links, and a robust base of high-income industries.

While year-on-year rent growth has slowed, North Jersey still outpaces the national average when it comes to competitiveness. Entry costs are higher, but investors who can secure well-located assets tap into a steady tenant base and limited new supply.

4. Selective West Coast opportunities: Orange County, San Diego

Opportunities on the West Coast are more selective, but markets like Orange County and San Diego continue to deliver. Both metros face high barriers to entry, limited land for development, and constant demand from renters who have money to spend.

These dynamics can help protect your investment portfolio against the broader supply risks seen elsewhere in the West. The trade-off is higher acquisition pricing and tighter margins, but for investors seeking exposure to coastal resilience, these submarkets can offer durable long-term performance.

Real estate markets to approach with caution

Not every multifamily real estate market is heading for stable growth. In some metros, high demand is being undercut by high levels of new supply, stretched affordability, or strict regulations. This doesn’t necessarily make investment impossible, but tapping into these markets requires careful underwriting and submarket selection.

Oversupply in the Sun Belt

Many Sun Belt markets, including Phoenix and parts of Texas, are wrestling with the consequences of rapid development. Thousands of new units are hitting the market just as rent growth is slowing, so occupancy rates (and returns) are shrinking. While more people are moving to the Sun Belt, the high supply means your apartment building could be sitting empty for months before securing a tenant.

Affordability limits on the coasts

High-rent coastal markets like San Francisco, Los Angeles, and New York are always desirable, but also face affordability ceilings. Even although demand is strong, renters might not be able to absorb rent increases: even in the face of operational or value-add investments. This can cap your long-term revenue.

Policy and rate sensitivity

Interest rate volatility and local regulatory frameworks—like New York’s rent control laws— also shape risk profiles in certain metros. Markets with complex zoning and rising property taxes can erode investor returns, especially when financing costs are high.

In these environments, even well-located assets might struggle to deliver the same performance seen in more business-friendly regions.

What multi-family property investors should do

Averages don’t tell the whole story, and your performance will depend on market-level dynamics. Real estate investors who can adjust their playbook based on this will be in a better position for resilient returns.

Focus on supply and demand balance. Markets where renters are snapping up new supply and where construction pipelines are slowing down are more likely to deliver consistent occupancy and rent growth.

Prioritize value-add opportunities. With rent growth modest in many metros, the strongest returns may come from repositioning or operational improvements rather than relying solely on market-driven gains. If you need some inspiration, check out our tips on maximising your return on investment from mixed-use properties.

Underwrite conservatively. Elevated interest rates, softening in some markets, and ongoing cost inflation mean pro formas should account for higher financing expenses, potential vacancy swings, and thinner margins.

Seek regulatory-friendly, diversified economies. Regions with predictable policy environments, pro-growth zoning, and broad economic bases are better equipped to weather both cyclical and structural pressures. For more on cyclical pressures, read our white paper on the volatility of market rates.

Turning insights into action

In the second half of 2025, smart money is looking to the Midwest for stability, the Southeast for growth, and coastal markets where supply is tight. By focusing on the right regions, investors in multi-family properties can build returns that hold up even as rates move around.

At Express Capital Financing, we back investors with the funding support they need to move quickly on the best opportunities. Our bridge loans for multi-family and mixed-use investments are designed to maximize your success, helping you put capital to work where it counts.

Apply today for your customized quote.