Individual Investing Blog

Top 12 Markets for US Multifamily Total Returns

Written by Ellie Perlman | Aug 31, 2020 4:00:00 AM
When investing in real estate in general, and multifamily in particular, selecting the right market is critical. I personally like multifamily because this asset class outperform all other asset classes. According to CBRE, “Over the past 25 years, multifamily investment has had the highest average returns of any commercial real estate asset class. The 9.8% average annual return is slightly ahead of industrial, and more than 100 basis points greater than office.” But, not all markets perform the same, and knowing which markets are performing well and still generating strong returns, even in a pandemic, is very important information to consider when committing to a potential investment. The reality is that we are now in a recession, and while 9.8% return might not be a realistic expectation in many markets these days, many markets are still capable of achieving solid returns.
 

Another factor to also pay close attention to is cap rates. Cap Rate indicates the investment risk and calculates what your return could be if you paid for it with 100% cash (no leverage or financing involved). Cap rates are used to value commercial properties in relation to other comparable properties (“comps”) in the area. As a rule of thumb, an attractive investment is to purchase a property with a higher cap rate than its comparable properties in the area, and sell it at a lower cap rate than the one you bought it for. The reason for this is because the lower the cap rate, the more the property will be worth.

Finally, above all else, is demand. Being aware of the percentage of renters within each market, as well as the number of competitors, including new development, is another key factor to take into consideration. Afterall, even if you get a great deal, without a stable tenant base, the property will not be profitable.

Here are the 2nd quarter of 2020 top 12 markets for US multifamily total returns:

 

12. Boston, MA 

  • Annualized Total Return: 3.7%
  • 2020 Average Cap Rates: 4.6% - 6.0%
  • Renter Percentage: 38.16%
 
 

11. Palm Beach, FL 

  • Annualized Total Return: 4.0%
  • 2020 Average Cap Rates: 4.6% - 6.0%
  • Renter Percentage: 30.52%

 

10. Seattle, WA 

  • Annualized Total Return: 4.1%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 40.01%
 
 

9. Atlanta, GA 

  • Annualized Total Return: 4.2%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 37.04%
 
 

8. Fort Lauderdale, FL 

  • Annualized Total Return: 4.7%
  • 2020 Average Cap Rates: 4.6% - 6.0%
  • Renter Percentage: 50%
 
 

7. Minneapolis, MN 

  • Annualized Total Return: 5.0%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 28.43%
 

6. Tampa, FL 

  • Annualized Total Return: 5.2%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 35.62%
 
 

5. Denver, CO 

  • Annualized Total Return: 5.5%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 35.86%

 

4. Austin, TX 

  • Annualized Total Return: 5.8%
  • 2020 Average Cap Rates: 4.6% - 6.0%
  • Renter Percentage: 42.29%
 
 

3. Orlando, FL 

  • Annualized Total Return: 6.8%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 40.68%
 
 

2. Charlotte, NC 

  • Annualized Total Return: 6.9%
  • 2020 Average Cap Rates: 4.5% - 6.1%
  • Renter Percentage: 47.10%
 
 

1. Phoenix, AZ 

  • Annualized Total Return: 10.5%
  • 2020 Average Cap Rates: 4.6% - 6.0%
  • Renter Percentage: 36.33%
 
 
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About Ellie Perlman
 
Ellie Perlman is the founder and CEO of Blue Lake Capital, a woman owned multifamily real estate investment firm focused on partnering with family offices and accredited investors to build and preserve generational wealth. Since its founding in 2017, Blue Lake has successfully acquired and operated multifamily assets across high-growth U.S. markets, completing $1B+ in transactions.

At Blue Lake Capital, Ellie and her team work exclusively with family offices and accredited investors, offering carefully curated investment opportunities that emphasize long-term wealth creation, stability, and risk-adjusted returns. A defining aspect of Blue Lake’s investment strategy is its integration of advanced AI-driven analytics and data science into the entire lifecycle of acquisitions and asset management. By leveraging cutting-edge technology, the firm executes data-driven forecasting on market trends, asset performance, and tenant behavior, ensuring strategic decision-making and optimized returns.

In addition to leading Blue Lake Capital, Ellie is the original founder and host of "REady2Scale - Real Estate Investing" podcast, which provides insights into multifamily real estate, alternative investments, and finance.

Ellie began her career as a commercial real estate attorney, structuring and negotiating complex transactions for one of Israel’s leading development firms. She later transitioned into property management, overseeing over $100M in assets for Israel’s largest energy company.

Ellie holds a Master’s in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can learn more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com. 
 
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.
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