Given that this year has been unprecedented, the impact for real estate investors was not clear in the first months of the pandemic. However, multifamily has been one of the most stable assets so far, as the reality is that shelter is always a need that must be met. With the economic impacts of the pandemic, the demand for multifamily housing has only strengthened, as renting is becoming an increasing solution for many. Despite the grim outlook of the current national unemployment average of 6.9%, not only are we seeing an increasing demand for housing, but even a preference for renting and an apartment community. My company, Blue Lake Capital, was pleasantly surprised to discover that the “new normal” lifestyle of remote living has actually increased our profits, as tenants are more commonly requesting upgraded units, since they spend much more time at home.
That being said, not all are faring as well. The key to being successful in real estate investing, from my perspective, is rooted in being conservative, patient, and highly selective of which markets to invest in. Due to the pandemic, some investors are struggling with misconceptions of how to respond to these challenging times, but the truth is that even in a global pandemic, multifamily real estate investing is standing strong.
As you look at the markets providing the stronger total returns vs the ones performing “poorly”, it's important to understand that the average US multifamily total return is 2.3%. As you’ll see, some markets are performing incredibly well. Yet, even the worst performing markets are not a drastic drop, showing that multifamily investing continues to be incredibly resilient, even in a pandemic.
Top 5 Real Estate Markets with the Highest Total Returns in 2020:
5. Charlotte, NC
Total Annual Returns: 4.6%
Major Industries: Advanced Manufacturing, Distribution, Banking, Financial Services
Percentage of the Population that Rents: 34.57%
Average Rent: $1,276
4. Denver, CO
Total Annual Returns: 5.0%
Major Industries: Aerospace, Energy, Financial Services, Telecommunications
Percentage of the Population that Rents: 35.74%
Average Rent: $1,635
3. Orlando, FL
Total Annual Returns: 5.2%
Major Industries: Technology, Aviation & Aerospace, Film & TV Production, Manufacturing
Percentage of the Population that Rents: 38.09%
Average Rent: $1,391
2. Phoenix, AZ
Total Annual Returns: 9.2%
Major Industries: Agriculture, Oil & Gas, Construction, Manufacturing
Percentage of the Population that Rents: 35.45%
Average Rent: $1,175
1. Salt Lake City, UT
Total Annual Returns: 11.6%
Major Industries: Educational Services, Healthcare & Social Assistance, Retail Trade
Percentage of the Population that Rents: 32.73%
Average Rent: $1,253
Bottom 5 Real Estate Markets with the Lowest Total Returns in 2020
5. San Francisco, CA
Total Annual Returns: 0.4%
Major Industries: Tourism, Technology, Financial Services
Percentage of the Population that Rents: 45.97%
Average Rent: $3,111
4. Portland, OR
Total Annual Returns: 0.4%
Major Industries: Technology, Manufacturing, Recreation
Percentage of the Population that Rents: 38.21%
Average Rent: $1,493
3. Houston, TX
Total Annual Returns: - 0.5%
Major Industries: Aerospace & Aviation, Advanced Manufacturing, Energy
Percentage of the Population that Rents: 39.92%
Average Rent: $1,106
2. New York, NY
Total Annual Returns: - 0.7%
Major Industries: Finance, Trade, Healthcare
Percentage of the Population that Rents: 46.48%
Average Rent: $3,790
1. Chicago, IL
Total Annual Returns: - 1.5 %
Major Industries: Financial Services, Engineering, Publishing
Percentage of the Population that Rents: 35.55%
Average Rent: $1,821
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About the Author
Ellie is the founder of Blue Lake Capital, a real estate company specialized in multifamily investing throughout the United States. At Blue Lake Capital, Ellie helps investors grow their wealth and achieve double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
Ellie is the host of REady2Scale , a podcast that highlights honest, insightful, and thought-provoking discussions on the multiple approaches for successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.