InvestmentsReal Estate

Here are 4 “buy” cities for multifamily investment

These four cities are heating up and offer great upside for investors buying into the market

Scouring the nation for your next cash cow multifamily acquisition? Look no further than these four underrated cities RealPage says have great upside.

Things are a little too competitive for to be profitable for many investors in the primary markets. RealPage’s picks are not the sexiest markets, but their fundamentals are solid and their growth potential make them worthy candidates for investment.

1. Knoxville, Tennessee

A college town with a solid economic base, Knoxville has been sleepy during this cycle, but is stirring now.

Knoxville is not a hot job node, but it does have the University of Tennessee, the Department of Energy’s massive presence in Oak Ridge and several large healthcare facilities that keep the economy humming along and talent ready to go.

Knoxville has also benefitted from a relatively conservative construction pipeline this cycle, which have kept demand ahead of supply during this cycle. Occupancy has been hovering between 95% and 97% for the last three years, and as of the second quarter of this year, occupancy was at 96.4% while rent growth is at a near all-time high at 5.4% annually.

2. Tacoma, Washington

Tacoma’s multifamily market is blazing right now. Strong employment growth and spillover from Seattle’s day in the sun are pouring gasoline on the city’s multifamily fundamentals.

Tacoma led the nation in job base growth in the year-ending with an employment rate expansion of 4%. Over the course of this cycle, Tacoma has increased its job base by 22.3%, peaking in 2016 with 12,600 jobs added that year.

Like Knoxville, Tacoma’s fundamentals are benefitting greatly from a constrained construction pipeline, adding an average of just 600 units per year during this cycle, increasing its existing base by 9.5% over the last eight years.

This has contributed to stellar rent growth, especially for a secondary market. Tacoma was no. 5 in the nation for rent growth in the year-ending second quarter with an increase of 6.7%. Annual rent growth has averaged 7.7% since the beginning of 2015.

3. Lakeland-Winter Haven, Florida

Perched between Tampa and Orlando–both hot markets in their own right–Lakeland-Winter Haven has been making great job gains since 2012 while building apartments intermittently at a conservative pace.

Supply delivery has increased a little in Q2 with a 3% in inventory thanks to the delivery of 700 units. But, before that, from Q2 2014 to Q2 2016 there were no deliveries in the market, and looking forward there are no deliveries in the near-term either.

Occupancy in the area is at 97% and rent growth is at a whopping 6.3%, ninth strongest in the market.

4. Salinas, California

Salinas is a rural market stirring from its slumber. In the last year, it has more than doubled its historical growth with a 3.2% increase in its economic base.

Annual deliveries have averaged just-below the 100-unit threshold throughout this cycle which is keeping occupancy at a 97.8%, one of the nation’s strongest.

With the recent economic momentum and virtually no vacancy, Salinas has been exhibiting solid rent growth at 5.4%.

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