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What Are the Best U.S. Areas for Multi-Family Investments?

If you’re ready to take the next step and dive into multi-family investments, you may be wondering where to look for your first (or next) property.

Just about every city in the U.S. offers profitable opportunities, but some areas are naturally more lucrative than others.

Let’s take a look at some of the best places to stake out your next multi-family investment.

Sacramento, California

With home prices rising in Sacramento, rental growth is through the roof. Freddie Mac has projected that rental growth in the city will exceed 6% in 2016. Low vacancy rates and rebounding employment make this city an excellent place to invest if you have a higher budget.

According to Ten-X, the average cost of rent has increased from $1,054 per unit in 2015 to $1,259 per unit this year. With an unemployment rate of 5.5%, Sacramento is a smart choice for multi-family investments.

Nashville, Tennessee

Nashville’s thriving job market is attracting millennials, and the city outperformed the national market last year. It is estimated that at the end of 2015, the city had a vacancy rate of 4.8% on average and an average rent price of $998 a month.

Prices for purchasing units is cheap, too, with the average sales price coming out to $72,800 per unit.

While Nashville is an attractive city, you’ll face stiff competition here. Do your research, and find the right area to invest.

Phoenix, Arizona

While rent prices are lower than Nashville and Sacramento, Phoenix offers great investment opportunities for adventurous investors. Employment rates are up, and vacancy rates are low in this desert town.

Ten-X estimates that NOI returns are in the 5% range for multi-family investments in the city. Rent is on the rise, too. In 2015, the average cost of rent was $802 per unit. In 2019, that rate is expected to rise to $964 per unit.

Unemployment rates are very low in the city, too: 4.7%.

You’ll face a little less competition here, but don’t expect to charge ultra-high rates for rent. Properties are cheaper to purchase, so don’t let the lower rent rate deter you.

Los Angeles, California

If you have a bigger budget to work with, Los Angeles is a safe place to invest in multi-family units. At the end of 2015, the vacancy rate for the city was estimated to be just 3% – extremely low. Demand is high, and supply is limited.

The average rent price in the City of Angels was $1,842 last year, with average unit prices of $178,600.

Fort Lauderdale, Florida

Location, location, location. Fort Lauderdale is a natural pick for multi-family investing, and now that unemployment rates have dropped below the national average, there’s even more incentive to take the plunge.

Freddie Mac says rent growth will reach 4% this year, and the city has nearly a 4-star rating when it comes to investment climate.

Rent is rising, too, as more people head to work and new people move into the city. The average rent price in 2015 was $1,247 per unit. That number is expected to rise to $1,493 per unit in 2019, according to Ten-X.

Raleigh, North Carolina

Employment is on the rise in Raleigh thanks to the Research Triangle, and multi-family demand is on the rise. It’s projected that rent may rise as much as 20% by 2019 due to high demand and low supply.

Raleigh has a favorable multi-family investment environment, and an even friendlier overall investment environment.

In 2015, the average cost of rent was $886 per unit. Rent is projected to reach $1,069 per unit by 2019.

Unemployment is low, too, at 4.4%.

San Diego, California

Although the cost of living is higher, millennials are flocking to San Diego in droves. Multi-family properties will continue appreciating in value, and the city has the benefit of being more affordable than the Bay Area.

With an average rent price of $1,627 per month, investors can generate a modest income off their investment properties here. Vacancy rates are low, too, at 3.2%.

Property prices are a bit on the high end, with the average price at $165,300 per unit (still lower than Los Angeles).

Orlando, Florida

With its close proximity to Disney World, Orlando is a smart place to invest in multi-family properties – be it for long-term or vacation rentals.

Employment rates are even higher than they were in the 1990s, according to Ten-X. Vacancy rates are projected to dip to 4.3% by 2019.

Orlando is almost always listed as one of the top cities for multi-family investments, but do expect to face competition here. With demand continuing to rise, there’s still opportunity to break into the city’s market.

In 2015, the average rent price was $970 per unit, and that number is projected to rise to $1,169 per unit by 2019. Unemployment rate is a low 4.3% in the city.

Denver, Colorado

Like San Diego, Denver is a haven for millennials, and the city is seeing exceptional rental rate growth. By the end of 2016, the Mile High city is expected to have a vacancy rate of just 4.3%.

The average cost of rent in the city is $1,310 per month, and the average multi-family unit costs around $105,500.

The only drawback to investing in Denver is that the city is becoming fiercely competitive. Investment sales for multi-family units rose 258% in 2015, reaching $1 billion.

The Bay Area in California

There’s no question that the Bay Area in California is one of the most lucrative areas to invest in the United States. The Bay Area includes San Jose, San Francisco and Oakland.

The average vacancy rate in the area ranges between 2.3% and 3.2%.

Oakland is the most affordable area to invest, with the average cost of units being $166,600. Rent is a little lower here (if you can call it that) at around $1,965 per month.

Units in San Francisco cost $274,944 on average, but rent prices are much higher.

Investment growth in the Bay Area has far outpaced most other areas in the United States, making it one of the best places to invest in multi-family property.