What are the Best Cities for Multifamily Investing?

The 6 Best Cities to Invest in Apartment Buildings in 2019

2018 was a great year for apartment investing-- and the first half of 2019 hasn’t been too bad, either. Though some are concerned about an increased supply of properties on the market, as well as potential increases in interest rates, now is still an incredible time to purchase a multifamily property. To help give you some ideas about where you might like to invest, we’ve listed some of the best markets in the U.S. to invest in apartment buildings in 2019 and beyond. 

1. Minneapolis - St. Paul 

  • Employment Growth: 1.5%

  • Construction: 4,900- 6,700 units (reports differ) 

  • Rent: +5.7% 

  • Vacancy: -0.50% 

Minneapolis- St. Paul is considered one of the top multifamily markets in the U.S..-- and for a good reason. Unemployment is sitting at an incredibly low 2.8% (and dropping), while the area’s labor force has increased by nearly 5% in the last few years. In fact, over the last 5 years, the area has added a staggering 130,000 jobs, attracting workforce talent from other parts of Minnesota, as well as from neighboring states, like Illinois. And, over the last 4 years, approximately 42,200 new households have been added to the market, with another 17,500 households expected to form during 2019. Coupled with rising housing prices, this population influx should keep rental demand high in both urban and suburban markets. 

2. San Diego, CA

  • Employment Growth: 1.5%

  • Construction: 3,220 units 

  • Rent: +5.7% 

  • Vacancy: +0.10% 

Southern California is one of the hottest multifamily and commercial real estate markets in the U.S., but not all areas are ideal for investors, especially those who aren’t already established in the market. Fortunately, San Diego presents viable opportunities for both first-time and experienced apartment buyers. The San Diego market continues to add jobs, with more than 20,000 jobs added between March 2018 and March 2019. While unemployment did increase slightly over that period, overall, it’s still well below long-term area averages. Plus, overall employment is anticipated to increase by 1.6% through 2019, so the area’s small uptick in unemployment shouldn’t be too much of a concern. Demand for rental housing remains high, due to the aforementioned employment factors, as well as the lack of affordability of single-family homes in the area. 

3. Orlando, FL 

  • Employment Growth: 4.9%

  • Construction: 6,200 units 

  • Rent: +7.8% 

  • Vacancy: +0.60% 

Since Disney World opened in the 1970s, tourism has been a major pillar of Orlando’s economy, and the area’s tourism industry seems to only keep growing. In fact, a record 75 million people visited Orlando in 2018, a factor that certainly contributed to the area adding more than 50,000 jobs that year. Like its tourism sector, Orlando’s job market is expected to continue growing at a healthy pace, with growth of 1.6% per year expected through 2022 (compared with 0.6% growth for the U.S. as a whole). Right now, there are 12,400 units currently underway in Orlando, but despite this, demand is expected to remain strong for several years to come. 

4. Knoxville, TN

  • Employment Growth: 2.1%

  • Construction: 1,100 units 

  • Rent: +4.0% 

  • Vacancy: -0.60% 

Knoxville, Tennessee may not be the flashiest real estate market on this list, but it can still provide a wide variety of opportunities for multifamily investors. As the third-largest city in the state, Knoxville hosts the headquarters of multiple regional and national companies, as well as being the home of the University of Tennessee. Construction activity in the Knoxville area is slow, and, with a 96.6% apartment occupancy rate, demand for quality housing remains high. While employment growth hasn’t been particularly high either, a new automotive parts plant and a slated airport expansion should bolster the local job market in the coming 24-36 months. 

5. Tampa- St. Petersburg, FL

  • Employment Growth: 2.3%

  • Construction: 3,500 units 

  • Rent: +7.3% 

  • Vacancy: -0.60% 

Like Orlando, the Tampa-St. Petersburg area is one of the fastest-growing economies in Florida, having added approximately 10,300 jobs between February 2018 and February 2019. Economic estimates suggest that this trend of job growth is likely to continue, especially due to the fact that several major firms have recently relocated their headquarters to the area. In addition to the influx of corporate activity, Tampa’s hospitality and tourism market remain strong, with nearly 6,000 jobs being added to that sector over the last 12 months. And, while a fair number of units will be added to the market in 2019, demand remains high, and rents are expected to increase by 3.3% by the year’s end. 

6. Phoenix, AZ

  • Employment Growth: 3.8%

  • Construction: 10,600 units 

  • Rent: +6.2% 

  • Vacancy: +0.20% 

The Phoenix area is another one of the hottest multifamily markets in the nation, with more than 60,000 jobs added between Q1 2018 and Q1 2019. While unemployment did rise slightly over the same period, the vast increase in jobs has kept area housing demand strong. In fact, nearly 3,000 units were absorbed in 2019, while the vacancy rate dropped to 4.7%. Rent growth in Phoenix also remains high, having increased 8.1% over the last 12 months, with asking rents in some submarkets increasing as much as 10.4%. All of this bodes well for multifamily investors looking to purchase an apartment building (or buildings) in the area.