When it comes to multifamily investing, finding a good deal can be a challenge. Currently, the market has rebounded well and deal flow has picked up significantly, amongst other things. However, how do you really know what a good deal is in multifamily investing? There are some general rules of thumbs that you should always want to see in an opportunity.
These include a cash flowing NOI (Net Operating Income), strong occupancy, reasonable rates of collections, conservative returns, and other factors. One indicator of finding a deal with good value can also be determined by looking at market activity, because of course, one key factor has and will always be location, location, location.
Despite the turbulence of 2020, there were several markets that proved multifamily investing is a resilient and reliable investment vehicle. With the migration of countless renters moving from primary to secondary markets throughout the pandemic, the trend and demands for multifamily housing can’t be better stated than by a recent report by Yardi Matrix in which, “Secondary markets, with $28 billion of transactions, dominated activity, representing 55.6% of all property sales” in 2020. I can personally vouch this is true, as my company Blue Lake Capital, acquired and has been over performing in one of these very secondary markets.
Monitoring transaction activity helps to not only show which markets are increasingly in demand, but also where there is better potential to find promising deal value. Now, this is not to say that if everyone rushes into a market to buy properties, you should do the same. The key is to look closely at the right numbers. Some of the factors to consider when evaluating a market are what is the average price per unit, what is the average rent in the metro area, and how heavy is the demand in the market?
The key to finding deal value is not just finding the cheapest property around, but rather the one with strongest potential, that is in the right location and can be repositioned through better management to increase profits through rent increases and decreased operation costs. This is a classic value-add strategy and why multifamily investing is the “darling child” of many investors.
With this in mind, let’s look at the Top 10 Markets for Multifamily Deal Value:
10. Denver, CO
Price Per Unit: $247,160
Total Transaction Volume in 2020: $4,435.8M
Average Gross Rent: $1,468
Percentage of Renters in the City: 35.74%
9. Washington, DC
Price Per Unit: $235,076
Total Transaction Volume in 2020: $5,468.2M
Average Gross Rent: $1,708
Percentage of Renters in the City: 36.48%
8. Miami, FL
Price Per Unit: $224,266
Total Transaction Volume in2020: $2,333.2M
Average Gross Rent: $1,408
Percentage of Renters in the City: 49.62%
7. Phoenix, AZ
Price Per Unit: $187,251
Total Transaction Volume in 2020: $5,879.7M
Average Gross Rent: $1,188
Percentage of Renters in the City: 35.45%
6. Austin, TX
Price Per Unit: $160,872
Total Transaction Volume in 2020: $2,387.3M
Average Gross Rent: $1,327
Percentage of Renters in the City: 42.37%
5. Charlotte, NC
Price Per Unit: $158,235
Total Transaction Volume in 2020: $2,959.3M
Average Gross Rent: $1,077
Percentage of Renters in the City: 34.57%
4. Tampa, FL
Price Per Unit: $155,874
Total Transaction Volume in 2020: $2,518.9M
Average Gross Rent: $1,160
Percentage of Renters in the City: 33.27%
3. Atlanta, GA
Price Per Unit: $142,429
Total Transaction Volume in 2020: $5,253.5M
Average Gross Rent: $1,224
Percentage of Renters in the City: 35.73%
2. Dallas, TX
Price Per Unit: $128,712
Total Transaction Volume in 2020: $5,501.8M
Average Gross Rent: $1,202
Percentage of Renters in the City: 40.46%
1. Houston, TX
Price Per Unit: $113,460
Total Transaction Volume in 2020: $2,328.2M
Average Gross Rent: $1,139
Percentage of Renters in the City: 39.92%
Considering these promising trends and renewed market activity, we are keeping busy actively evaluating and touring properties in several of these very markets including Atlanta, Charlotte, Dallas, Austin, Tampa, and more. Though it’s easy to get caught up in the momentum of it all, the key to finding the right deal is remaining pragmatic, data focused, and patient in securing the next high value deal. Stay tuned…there’s exciting opportunity
soon to come!
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About the Author
Ellie is the founder of Blue Lake Capital, a commercial real estate investment firm specialized in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
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.