Best Places To Invest: Study Finds The Level Of Multifamily Investment Success Is Tied To What Cities You Buy In

Whether buying one or several multifamily investment properties ranging from a single duplex to an apartment complex, your level of income may depend wholly on geography, according to CRED iQ.

CRED iQ, a commercial real estate data, analytics and valuation platform, provides real-time property, loan, tenant, ownership and valuation data for over $2 trillion of commercial real estate. In its latest data analysis, CRED iQ found cities that are tremendous opportunities and some that are problem areas if an investor is looking for immediate returns. 

Multifamily properties have been a boon in the last couple of years for entry-level investors, many of whom live in one investment unit while renting out others. Another beginning strategy is for young couples to rent out their first home while looking for a second. According to Savills, one of the world's largest real estate brokerage firms, 39% of property investment in the U.S. is now multifamily. 

CRED iQ examined revenue trends for over 10,000 multifamily properties and calculated revenue per occupied unit for 2021. That calculation included base rents and additional income, like parking and laundry, and reviewed the 100 largest primary and secondary multifamily markets by metropolitan statistical area (MSA). The company found that whether buying a home or an investment property, it’s still all about location, location, location. 

CRED iQ found a considerable disparity between markets in the U.S. For example, its analysis unsurprisingly found that the Bridgeport-Stamford-Norwalk, Connecticut, MSA had an occupied unit average of $2,648, with average operating expenses of $1,203 and operating leverage of 45%. The New York-Northern New Jersey-Long Island MSA came in close behind at $2,644, with an operating leverage of about 44%.

But CRED iQ also found some surprises in markets where many would not expect them. For instance, the Philadelphia-Camden, New Jersey-Wilmington, Delaware, MSA multifamily units showed a considerably higher per-unit revenue than what is believed to be the hot Miami-Fort Lauderdale-Pompano Beach area. Units in Roanoke, Virginia, turned out more profitable than the seemingly recession-proof area of the Washington, D.C.-Arlington-Alexandria, Virginia, area. 

Also standing out in the report was that by isolating the top 20 markets, the average revenue per occupied unit ($1,918) was approximately 22% higher than the average for all markets. Unsurprisingly, MSAs located in California accounted for seven (35%) of the top 20 markets with the highest revenue per occupied unit. Among the top MSAs in California were San Jose and San Francisco, ranking in the five highest-grossing multifamily markets.

Compare that to the bottom cities in the analysis — those with high-inventory markets with lower revenue, including Kansas City ($995), Detroit ($1,081), San Antonio, Texas, ($1,143), Houston ($1,146) and Columbus, Ohio, ($1,161).

The average annual revenue per occupied unit across all the primary and secondary MSAs was $1,568, showing again that when it comes to multifamily investment, one size — or city — doesn’t fit all investment expectations.

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