Multifamily properties contain many units for renters, providing an opportunity to earn significant passive income. Multifamily real estate can include properties ranging from a duplex to a large scape apartment building. In the last year, even through a volatile real estate market, there has been growth in several Midwest United States multifamily real estate markets. Here are some of the best multifamily markets in the Midwest U.S. to consider for your real estate investment portfolio.
Kent Ritter is a dedicated multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More
Indianapolis, IN
Indianapolis had more multifamily real estate transactions than any of the other Midwest cities on our list. One of the reasons behind this is that many investors believed Indianapolis was one of the best-kept secrets in the Midwest area. As we move through 2021, the secret is out about the affordable yet lucrative multifamily investments in the Indianapolis area.
The city of Indianapolis is preparing for a significant increase in population over the next few years. With many good jobs to offer residents, the rental market is going to thrive. People moving to the city will want a place to hang their hats for a few years before purchasing their own home.
Colombus, OH
Colombus is another hot Midwest market for multifamily properties. One of the main reasons behind the strength in the Colombus market is its colleges and universities. The city of Colombus has more than 30 colleges where you can earn your degree.For those that have come to the area for school and want to stay when school is finished, the reasonably priced rent in Colombus makes it a great place to live. Columbus rental costs average just under $1,000 a month.
Lexington, KY
42% of the population in Lexington, KY currently rents, which is greater than the average 33% rental rate in the state of Kentucky. The average rent in the city is $999, representing a 7% growth over the previous year. Additionally, the unemployment rate has come down to 4.5% from its peak of 15.8% at the beginning of the pandemic in 2020. With the number of renters so high, Millennials moving to the city at increasing speeds, and improved employment conditions, you get the perfect combination for multifamily investment.
Like many other areas in the country, the Lexington housing market is on fire right now, and the pricing is continuing to increase. This helps create a larger pool of renters, who don’t want to get involved in the housing game until things settle. With more young renters to contend with, the rental market in the city has gotten quite strong.
Louisville, KY
When people are looking for a place to rent, quality of life will matter just as much as the price of the rental. Louisville is one of those cities that can provide affordable rent and high quality of life for residents.
40% of the city’s population currently rents, offering a significant opportunity for multifamily property investors. With the rent prices staying stable and home prices increasing, we are seeing more and more Louisville renters decide that renting is the best option for the time being.
Twin Cities, MN
With those brisk winters, it may be hard to imagine the Twin Cities as a place that younger people are flocking to, but we are watching it happen before our eyes. Millennials seem to love the Twin Cities, and they have no problem paying for rental units within the city.
One of the things that helps the strength of the Midwest multifamily market is the affordability of rent. However, in Twin Cities, more than 80% of rental units are priced over $1,000 per month. This means that if you can invest in a multifamily unit with lower carrying costs, your potential revenue can be considerably higher than other cities in the region.
Kansas City, MO
Single-family home prices in Kansas City have increased significantly, with a five-year increase of close to 50%. This steep price increase may explain why more and more Kansas City residents are becoming renters.
The lower mortgage rates brought about in 2020 have changed the way people are looking at buying houses. Sellers have the upper hand, taking full advantage and selling properties for well over what they are worth. Kansas City residents are opting for the relatively stable and steady renters’ market, so we can likely expect to see even more renters in the upcoming years.
Cincinnati, OH
Around half of the population in Cincinnati, OH currently rents, and the average rent in the city is $1,040 per month—topping the state-wide average of $813. According to a report by Marcus & Millichap, 2,200 units were completed and 27,300 jobs were created in Q1 2021. The city also has one of the fastest growing economies in the Midwest, with an expected 6% increase in its workforce over the next ten years.
The single-family home market in Cincinnati is explosive. According to Roofstock, the average home price has been increasing for 20 straight months, and single-family homes are selling at the second fastest pace in the entire country, behind only Omaha, Nebraska. Some homes are not even making it to the market before there are multiple offers and backup contingencies.
The problem with a hot real estate market, of course, is that buyers need to be ready with their financing and their decision making. If you are not prepared to decide on a Cincinnati home in a matter of 12 hours, you will lose the house. Of course, plenty of people will get involved with this, but for the most part, expect to see large groups of Cincinnati residents decide to stick with renting for quite some time.
Generate Passive Income with Multifamily Real Estate
The multifamily market has always been strong in the Midwest, and it doesn’t look like that will change anytime soon. When investing in multifamily properties, it is essential to consider why people want to live in these specific cities and other trends that may impact the market. When it comes to the best multifamily markets in the Midwest U.S., look to Indianapolis, Kansas City, St. Louis, and the other cities listed here.
Kent Ritter is a dedicated multifamily investor and entrepreneur empowering you to build real wealth through real estate syndication. Learn More
