Multifamily investing has become an increasingly popular real estate investment option for investors over the last few years. From Jan. to Sep. 2022, multifamily investing accounted for $64.2 billion in investment volume1. Despite a ~30% decline in 2023, multifamily investing remains the largest recipient of capital in the real estate market, and some experts project the sector to regain that 30% in volume2.
Multifamily investing offers a plethora of benefits over other real estate sectors such as single-family and commercial. Many investors have realized that benefits such as economies of scale, diversification, tenant stability, high demand, and potentially lower risk make multifamily investing a perfect fit for their investment strategy. However, before tapping into multifamily investing investors should consider how regional markets will affect their investment.
In this article, we will explore multifamily investing criteria from the perspective of regional markets to help you decide what locations may be best for your investment journey.
Understanding Multifamily Investing
One of the beautiful things about real estate investing is the bevy of product types available to investors, each with unique benefits. Generally, real estate can be classified into three main categories, those being multifamily, single-family, and commercial real estate.
Multifamily investing involves purchasing larger properties designed to accommodate and house multiple living units within a single building or location. Think of properties such as:
- Duplexes, triplexes, fourplexes
Multifamily properties can house anywhere from a couple to thousands of tenants. Tenants reimburse the owner for the use of the building via monthly rental payments, which make up the bulk of the income from multifamily investing.
Multifamily investing also opens the door to income via appreciation, such as when you decide to sell a property after it has increased in value over a period of time as well as powerful tax deferral tools such as the 1031 exchange.
Regional Multifamily Investing Criteria That Investors Need to Know
While multifamily investing can be a massive boon for many investors’ portfolios, there are many factors to consider when deciding on a location to invest in.
Some of the most important factors to consider include:
- Weather and environment
- Economic factors
- Cost of living
- Job market
- Rental demand.
These factors are essential to investment strategies because they can significantly affect the levels of success enjoyed by investing. For example, some regions have a higher demand for rental units than others. This increased demand lowers the risk of vacancy for units within a multifamily property, helping to ensure no missed opportunities for rental income.
Another example is the weather. In locations more prone to inclement weather, such as hurricanes, tornadoes, earthquakes, and wildfires, investors can expect to deal with an increased likelihood of environmental damage and higher insurance rates, cutting into their returns.
Job markets, the cost of living, and the strength of the economies in these regions are also significant because they heavily influence how much investors can reasonably charge for rent and the likelihood of maintaining stable tenants.
It should be noted that this is a broad comparison of the four most significant regions in the US. These regions can be further stratified as each state, city, town, and neighborhood will have unique criteria.
For some investors, having to worry about the minutiae of multifamily investing criteria may seem like a massive barrier to entry. But like any investment, multifamily investing takes time, dedication, and education to succeed.
However, options are available to less seasoned or conservative investors or those who want to test the waters of multifamily investing without having to worry about managing all of these individual components. That’s where Canyon View Capital can help.
Canyon View Capital Offers an Entrypoint to Real Estate Investments in the Midsouth and Midwest Regions
At Canyon View Capital, we have a strong understanding of the multifamily investing criteria outlined in this article. That’s why we choose to manage multifamily real estate in portions of the Midsouth and Midwest, better known as America’s Heartland.
We’re passionate about multifamily real estate, and we use that passion and experience to create investment products for investors who want to enjoy the benefits of multifamily investing and passive income without the hassle.
Still need more information on the Multifamily Investing Criteria?
122David Bitner, Jonathan Mazur, and Mike Wolfson, “United States Multifamily Capital Markets Report,” for Newmark Group, Inc. 1Q23, nmrk.com. Accessed July 29, 2023.37Missouri Economic Reaching and Information Center “Cost of Living Data Series” 1Q23, meric.mo.gov. Accessed July 29, 2023.
4Adam A. Millsap, “U.S. Economic Activity Moves South As Northeast’s Decline Continues” for Forbes, July 6, 2023, Forbes.com. Accessed July 30, 2023.
5United States Environmental Protection Agency, “Climate Change Indicators: Wildfires” July 2022. epa.gov. Accessed July 30, 2023.
6David Streitfeld, “States that have seen the largest rent growth so far in 2023” For Gwinnett Daily Post, Aug. 23, 2023, gwinnettdailypost.com. Accessed Aug. 29, 2023.
8Jill Jaracz, “For Tech Companies, Years of Easy Money Yield to Hard Times” For The New York Times, Jan. 23, 2023, updated June 20, 2023. nytimes.com. Accessed July 29, 2023.
9$1B figure based on aggregate value of all CVC-managed real estate investments valued as of March 31, 2023.
Eric Fisher, Chief of Staff
Eric joined Canyon View Capital in August 2021 with 15 years of hotel management experience grounded evenly between Property & Corporate Operations, and Business Development & Acquisitions. After $500M+ in hotel acquisitions, Eric uses his nuanced understanding of the acquisitions and transitions processes to support CVC real estate investments. His professional versatility makes Eric an invaluable resource for the President and Executive Team in all business functions, including Investments, Operations, and Strategy.