15 Markets Still Ripe for Multifamily Investment

The pandemic has sent many people home and many others packing for new work and living opportunities. At the same time, house prices have hit new highs, and now with interest rates sharply higher, affordability and competition have kept many prospective homebuyers in apartments.

That's especially true in our nation's hottest growth markets, where in-migration has helped drive demand to new heights. As a result, by just one measure, Zumper's national rent index now stands at a record $1,450 for a one-bedroom unit.

Here's a list of markets to consider for multifamily investing, whether you're going it alone, as part of a private partnership, or through such options as publicly traded real estate investment trusts (REITs).

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RealPage Analytics recently reported that it counted more than 33,000 new apartment units under construction in the big Austin market, among the most in the country. Job growth from many of the nation's largest tech-based firms is just one reason.

The other might well be Austin's reputation as a trendy place to live in general. Investors wanting to get involved might check out some of the REITs heavily committed to this market.

ALSO READ: Are REITs a Good Investment?

A sizzling economy has kept the Valley of the Sun at or near the top of the list for residential growth for some time now. RealPage Analytics recently said the city has more than 36,000 apartment units under construction.

Investors are responding to trends like this: Phoenix grew by more than 262,000 people from 2010 to 2020, the country's largest absolute increase in population over that decade. The population is now near 1.7 million.

Much has been written about the pandemic taking a big bite out of the Big Apple as an untold number of residents fled for the burbs and the hills. But here are some other numbers: Annual rent growth of more than 22%, occupancy rates above 98%, and about 33,000 more apartment units under construction. Many people are still finding a lot to like about living in America's largest city.

ALSO READ: This Office REIT Just Bought 2 Apartment Buildings -- Here's Why

Speaking of leaving town, the Inland Empire seems to be benefiting from people leaving uber-pricey Los Angeles to go one major market east to the San Bernardino-Riverside-Ontario region. Crexi reports a minuscule 1.9% vacancy rate, but only about 3,500 units are currently being built here. That could spell opportunity for multifamily investors in this metro of about 4.7 million people.

Raleigh is North Carolina's capital city and home to North Carolina State University, and Durham is home to Duke University. With nearby Chapel Hill (and the University of North Carolina), they form the core of the Research Triangle.

The metro area is growing fast, adding 3.3% more people in the past year alone to reach a population of about 1.5 million. And quality of life and a ton of high-paying jobs just bring in more folks looking to buy and rent.

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No small potatoes, Boise is another of those once out-of-the-way locations that have become a top choice among migrants from the West Coast and other U.S. markets. Idaho's capital city is known for its parks, eateries, cultural attractions, and outdoor activities in a beautiful mountain valley.

Crexi researchers say the average rent per multifamily unit here is $1,399, up about 16% year over year. A growing population should help sustain a sound multifamily investment here in the capital of the Gem State.

ALSO READ: How to Start Investing in Real Estate: The Basics

Big government, all the big business it attracts, and a surge of data center activity are helping the nation's capital and its big Virginia suburbs maintain their status as some of the priciest and most affluent neighborhoods in the land. Crexi says about 44,000 new apartments have been built or are under construction in this market, where the average rent is now about $1,944 per month.

Many people are already in Orlando, and more arrive every day. This Florida destination city adds about 1,500 residents a week and is expected to grow to a population of about 5.2 million by the decade's end. They're not all coming to visit Disney World and Universal, but that's not a bad way to spend some downtime if you go there to scout it out for your next move.

ALSO READ: 5 Money-Saving Tips for Your Trip to Orlando

There's more than one city by the bay. Across San Francisco Bay is Oakland, which ranks ninth on Zumper's list of America's most expensive rental markets. The average rent for a two-bedroom place rose 10% in the past year to $2,860. Compare that to $4,170 for San Francisco, and you can see at least one reason Oakland is a popular alternative.

Seattle is home to some of America's biggest corporate powerhouses, a seaport city on the sound, with a lot of culture and sports to occupy those not out enjoying the scenery and millions of acres of mountains and woodlands nearby.

Zumper places Seattle at 12th on its list of most expensive markets, with a two-bedroom going for an average of $2,680 after soaring nearly 28% in a single year. Lots of demand here, and RealPage Analytics says about 24,000 units are currently being added, growing the inventory by nearly 7%.

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Atlanta is one of America's top 10 markets, and this corporate and transportation hub is not done growing. The 11-county metro area has added more than 69,000 residents in the past year to reach a population of about 5.1 million. But it's only the 20th-most expensive major market in Zumper's rental rankings, pointing to its relatively reasonable cost of living.

RealPage Analytics says nearly 28,000 apartment units are under construction, so the demand is there. If you want to get involved, one easy option would be to plunk a few bucks down on Mid-America Apartment Communities (NYSE:MAA), America's largest apartment owner. This residential REIT has a big stake in the Atlanta market.

ALSO READ: What the Cooling Rental Market Means for this Multifamily REIT

There's something about Newark that developers like, especially those building multifamily housing. In its recent report, RealPage Analytics researchers found nearly 27,000 units under construction there, growing the inventory by about 5%.

The average rent of about $1,400 a month -- compared to the nation's highest of nearly $3,800 just across the Hudson River -- points to investors not having many new apartments that are empty and not bringing in income.

Quality of life in a beautiful mountain setting has attracted business and helped grow the population alike in Utah's capital city. CoStar says the average rent here is about $1,487 a month. The metro area now numbers about 1.3 million residents and is growing at a healthy clip that should help sustain a timely investment in multifamily housing.

Fort Lauderdale has long grown from a legendary spring break destination into a thriving year-round community full of retirees, young families, and everyone in between. Rents there have grown by about 25% in the past three years, according to CoStar Group, and vacancy rates of about 3% in Broward County point to continued demand that should nicely underpin a multifamily investment here.

With a metro population of about 2.6 million and growing fast, Charlotte is the largest market in the Carolinas. The Queen City has long been a job-generating banking center and now boasts a diverse array of industries based in or with large operations in the city.

The average rent in Charlotte, according to RentCafe, is $1,639 for a 942-square-foot apartment, pointing to its ability to offer a relatively modest cost of living, too, compared to a lot of other major markets.

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Regardless of whether a softening market for home sales might impact demand for apartments, there are still a lot of reasons to expect that business to remain strong. And the cities on this list are incredibly strong as we move forward into what could be a recession or at least some form of economic downturn.

People will always need a place to live. Many who can afford to buy a home may choose not to in order to maintain high flexibility and lower costs in their own lives and continue increasing investor opportunities in markets where more people and jobs are locating.

Marc Rapport has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mid-America Apartment Communities. The Motley Fool has a disclosure policy.