The Best Cities to Invest In Apartment Buildings
The best cities to invest in for apartment buildings are not the cities with astronomical prices that are flying so high that the only way is down.
It’s impossible to predict exactly when the market will peak but some forecasters point to cities like San Francisco, Seattle, Miami, and Denver and urge caution.
They advise owners of properties in these booming cities not to wait too much longer before selling.
In the current economy, most new jobs are at the lower end of the pay scale, many can no longer afford to buy their own home.
This equates to increasing demand for rentals but not high priced units.
Following this logic, investing in markets where prices are inflated is not a good strategy because the demand for expensive properties will decrease.
The focus of this article then is not so much to recommend specific cities in which to invest (although we do mention a few), because this decision depends heavily on your unique investment criteria and goals.
The focus of this article is to provide you with a scientific, data-driven basis for making excellent choices of your own.
As a side point, another consideration when making your choice of city to invest in is to note that there are landlord-friendly versus renter-friendly states when it comes to legislation.
In this article, we will point out a vital formula for syndicators who want to ensure good returns for their investors when it comes to selecting the right target cities for multifamily investment.
The credit for the data-driven approach that we will discuss belongs entirely to Neal Bawa. His webinars and seminars are attended by thousands of students nationwide.
Neal’s background in data has been the key to his success as an investor and syndicator; he advocates the following 5 point formula that will bring fantastic returns for you and your financial backers.
The Best Cities to Invest in – 5 Factors to Consider
Factors to Consider
1. Population Growth
Check the population growth of your proposed investment city between the year 2000 and 2017.
Make sure that, if the city is between a quarter of a million and 1 million population, there is a 20% population growth or greater over that period.
(15% growth for cities over a million, 10% growth for cities over 2 million, 30% growth for cities under a quarter million.)
For each year beyond 2017, add 1.25% growth (add 1% for cities over a million, and add 2% for cities under a quarter million)
In our Toolkit below we’ll give you resources where you can find this information, as well as the other items below.
A positive example would be Columbus, Ohio which has enjoyed a consistent population growth rate of +23% over that period.
Population in 2017: 859,035 (100% urban, 0% rural). Population change since 2000: +58.8%
2. Median Household Income Growth
Your qualifying percentage here should be 30% growth in the median household income.
This applies to cities of all sizes. For each year beyond 2016, add 2% growth to the 30% number above.
(Columbus = +31%)
(Charlotte = +29.89%) (Is that close enough Neal?)
3. Median House or Condo Value Growth
The median house or condo value growth should be at 40%.
This applies to cities of all sizes.
For each year beyond 2016, add 2.5% growth to the 40% number above.
This is not as difficult to find as it might seem, some cities in the U.S. are at 100% growth over that time.
(Columbus = +42%)
(Charlotte = +53%)
4. Change In Crime Levels
What you are looking for is a current crime level of 500 or lower in the city data crime index.
But, what Neal is stressing here is that there should be a smooth decline in the crime rate over the 2000 – 2016/17 time period.
This smooth decline indicates that the trend will continue which will have a direct, positive impact on home prices and rent growth.
This applies to cities of all sizes.
For each year beyond 2016, you DO NOT need to add or subtract from this 500 number.
5. Last 12 Months Job Growth Percentage
Examples of cities with excellent job growth stats that also meet the other criteria on this list are:-
- George, Utah
- Boise City, Idaho
- Kennewick, Washington
Two key differences with this statistic are that you are only looking at the last 12 months of data.
Look for numbers above 2% annualized job growth (1.5% for cities over a million).
It is important to take the entire 12 month period into consideration.
Our Toolkit below will show you where to find this data.
Cities under 250,000
.30% population growth from 2000 to 2017
|A positive example would be Columbus, Ohio which has enjoyed a consistent population growth rate of +23% over that period.||Population in 2017: 859,035 (100% urban, 0% rural). Population change since 2000: +58.8%|
Cities of 250,000 – 1,000,000
.20% population growth from 2000 to 2017
|(Columbus = +31%)||(Charlotte = +29.89%) (Is that close enough Neal?)|
Cities of 1,000,000 – 2,000,000.
.15% population growth from 2000 to 2017
|(Columbus = +42%)||(Charlotte = +53%)|
Cities over 2,000,000
.10% population growth from 2000 to 2017
Neal Bawa talks about a geographical corridor of opportunity running south from Deltona, through Orlando, down through Lakeland and Sarasota down to Fort Myers and Cape Coral.
All of those cities are great cities to invest in easily making the grade for desirable cities to target for investment including the 2% or above annual job growth criteria.
Owning an investment property in Orlando, for example, continues to make good investment sense. Orlando is experiencing 7.2% population growth.
The city is also becoming a business center for young professionals and the annual job growth is around 4.4%.
Another factor that makes Orlando a desirable option for property investors is that Florida is a state with no personal income tax.
The Orlando housing market is often pointed to as a great start point for new investors because of its affordability.
This affordability coupled with increasing rental income equals healthy positive cash flow.
Of course, there will always be exceptional deals that work for you as an investor that do not follow the formulas in the system outlined in this article.
For example, investing in your local region may not perfectly meet the criteria outlined here. But you may decide that your advantage in terms of local knowledge will give you the edge that you need. Or perhaps there is an x-factor that makes a certain property investment work outside of these parameters.
As a general rule, however, what will separate you from the pack as a syndicator worth your salt is a careful and analytical approach to your investment decisions. As outlined in this article.
Many investors focus on knowing all about the property they are thinking of investing in but as you know the property itself is much less important than the area in which it is found.
Pay careful attention to selecting the area you wish to invest in and use the criteria outlined above as a guide.
Long before you decide on the best market for your multifamily investment you should be building your list of potential investors and keeping the lines of communication open with them.
In order to do that, you need the right online hub for your digital marketing activity. You need a website that clearly shows that you belong in the competitive multifamily arena.
Apartment Investor Pro sites are designed specifically for real estate investors, they can be easily customized for your needs and content and they come at a fraction of the cost that you would incur if you had your site built from scratch.