What are the best markets for investing in apartment buildings in 2018? Before we answer that question, it is worth considering the overall economic climate. As we enter 2018, we are seeing a changing environment in multifamily investing, but some of the underlying keys for investors’ success are still there, if you look closely.
“The biggest challenge is going to be finding attractive places to put new money to work,” Brian Kingston, chief executive of Brookfield Property Group, one of the world’s largest real-estate investors, told the Wall Street Journal. “Investors need to be cautious about the prices they’re paying.”
Add to that the likelihood that interest rates are going to rise this year, and 2018 is shaping up to be particularly precarious.
But that doesn’t mean that Brookfield or any of the world’s other leading real-estate investors are going to be sitting on the sidelines this year. Rather, they are pursuing an unusually eclectic assortment of strategies spanning a wide range of geographies and asset classes.
Start with emerging markets where you see job growth and a favorable local government environment that encourages business development. As big cities see more new high-priced apartments coming on board in 2018, those rents will likely stop rising.
“Rents themselves are still lower in the suburbs, but if demand keeps growing for suburban rentals and supply continues to lag, that will also start to change,” Zillow Chief Economist Dr. Svenja Gudell said in a release.
“As more formerly urban renters move to the suburbs in coming years, we’ll likely start seeing more apartment buildings and walkable amenities popping up in those communities,” Gudell said.
As many of you know, my companies have been investing in emerging markets in Texas and Georgia for the last 10 years. Emerging markets are characterized by job growth, trending rental increases, absorption of supply, fewer permits issued for new construction, new business moving in the path of progress for that local segment of the MSA, and other factors.
We research deeply across the nation to find these great main markets and submarkets in which to invest in multifamily.
One hint I can give you is to look in the front and back of the Operating Memorandums of already-on-sale properties. These beautiful information brochures are usually five to 10 pages of great economic data and news about the area. Brokers include that to answer the question, “Why should Investors purchase that multifamily asset?” Look to the sources of the economic news and jobs-growth articles and even do more research from those sites or publications. This just saves a lot of time.
Increases in national rents have flattened for the last four months and observers are witnessing the slowest annual growth rate in six years, according to a new report from Rent Café.
The rental market is cooling down, with a 2.2 percent year-over-year increase, with the national rent reported at $1,354 in fall of 2017, according to Yardi Marix.
“The housing market follows a cyclical path. The fact that the prime summer seasonality did not cause significant rental growth is the latest signal that the market may be cooling,” Doug Ressler, senior analyst at Yardi Matrix, a sister division of RENTCafé, said in a release.
“However, these changes will be felt gradually, first in the largest and most expensive cities, followed by mid-sized markets, and eventually trickling down to smaller towns,” Ressler said.
I am quite bullish on Texas — particularly Houston, San Antonio and even parts of Dallas, although it’s a very heated market. Another state I am bullish on is Georgia, especially Atlanta and vicinity. And North Carolina-South Carolina is a third market where our research indicates great growth. Additional markets where I think it is equally good to invest because of potential growth include Cincinnati and Columbus, Ohio; Nashville, Tenn.; Birmingham, Ala.; and St. Louis, Mo.
Some of you may ask, “Vinney, what about Salt Lake City, and some cities in Arizona?” Please do your research and decide on that for yourselves.
I strongly urge you to marry the numbers from your stringent underwritings and don’t fudge or manipulate to make the opportunity work. Do extensive study about the local market before investing.
One thing is for certain: Multifamily investing is the real game in town. Jump into it as quickly as you can. Better yet, because there is so much money flowing all around you, harness that through syndication like I have been doing successfully with my teams for the last 11 years. Then you, too, can enjoy the bigger fruits of cash flow and equity gains for your valued investors and yourself.
Vinney Chopra is the Founder and CEO of Moneil Investment Group and President of Ideal Investments Group. Since coming to the United States more than 40 years ago - with only $7 in his pockets - he has built four successful businesses as well as his passions: a multifamily syndication academy and youth academy. With a bachelor's degree in mechanical engineering, he added a master's degree in business administration in marketing from The George Washington University, shifting his focus to marketing and motivation. He has been a professional fundraising consultant and motivational speaker for more than 35 years and also is a licensed real estate broker in California. Vinney and his wife started their real estate investments in 1983. He currently owns single-family homes and multifamily units in Texas, California, Atlanta, Arizona and India. People often call him “Mr. Enthusiasm” or “Mr. Smiles” for his positive attitude and commitment to bringing great value to everyone whose lives he touches.