Seeing as people find it cheaper to rent rather than buy in more than half of the nation’s counties, apartments for rent are in high demand. This, as well as a couple of other factors, makes apartment investing a profitable strategy in 2019. Before we list where to invest in apartments, we’ll tell you why this type of rental property should be your next purchase.
Investing in Apartments: Why It’s Smart
Apartment investments are still a smart move in the US housing market 2019. We’re seeing some indicators that this strategy won’t disappoint and can generate some serious returns. The rate of occupancy in US rental apartments rose by 20 percent from the last 10-year period, showing us that many still view renting as the preferred housing choice in real estate markets across the nation.
We’re seeing such a shift towards apartment living because it’s frankly the more convenient and affordable option for many. About 35 percent of the 2018 US housing inventory was made up of renter households (43 million rented versus 77 million owned). You’ll notice that a good portion of US renters is from the younger generation. As median income levels are not high enough to meet homebuying standards, the level of first-time buyers in the market is decreasing, with a recent drop from 39% to 30%. So investing in real estate apartments is supported by a sufficient renter pool which will keep these rental units occupied in the coming years.
The great thing about apartment investing is the range of investment properties you can choose from. These multi-family homes come at different price points and different sizes. So there’s something for anyone motivated enough to invest in apartments.
Apartment investing is notably successful in high-growth metros, in which apartment real estate investing is done with a value-add approach and professional property management is hired. Invest in the right market, and the rental income will cover all your expenses for apartment investing, leaving you with a good return on investment. Whatever strategy you choose to implement in apartment investing, do it in the following cities.
Related: How to Buy an Apartment for Investment: 5 Tips
Best Real Estate Markets for Apartment Investing 2019
Mashvisor’s rental property calculator finds key market trends and return on investment metrics for US real estate investors in any city or neighborhood market. Today, we’ve used it to analyze the profitability of apartment investing in the country and came up with this final list. Here are the best cities for apartment investing in 2019.
1) Silver Spring, MD
- Median Property Price: $227,756
- Price per Square Foot: $200
- Price to Rent Ratio: 12
- Monthly Apartment Rental Income: $1,619
- Apartment Cap Rate: 4%
Silver Springs is a very profitable housing market for apartment investing in 2019. Real estate investors can buy multi-unit properties at low prices and generate a strong return, as we can see with that average cap rate of 4%. Apartment complexes make up around 61% of housing inventory in the Silver Springs real estate market. They are quite high in demand as the Silver Springs population is 64% renters vs only 36% homeowners.
2) Venice, FL
- Median Property Price: $268,073
- Price per Square Foot: $222
- Price to Rent Ratio: 12
- Monthly Apartment Rental Income: $1,883
- Apartment Cap Rate: 3.5%
With the high demand for rental housing in the Florida real estate market, seeing Venice, FL on this list comes as no surprise. Whether it’s people moving for the tax benefits, or retirees looking to finally settle down in the Sunshine State, apartment investing in this market will be successful because rental demand is always present. In Venice, housing stock is pretty even between single-family homes and apartment complexes. Median home sales have increased by 6% since last year, so the market is realizing some healthy growth.
Related: Florida Housing Market: Where to Buy Long-Term Rentals
3) Las Vegas, NV
- Median Property Price: $166,629
- Price per Square Foot: $159
- Price to Rent Ratio: 12
- Monthly Apartment Rental Income: $1,134
- Apartment Cap Rate: 3.3%
One of the largest apartment investment markets in the US, the Las Vegas real estate market is well known as a leader for rent growth. In 2018, Las Vegas had year-over-year rent growth of 7.4%, which was one of the highest in the nation. Even though rents have been increasing over the past years, renters still find it relatively inexpensive and are keeping the demand for apartments up.
4) Honolulu, HI
- Median Property Price: $761,504
- Price per Square Foot: $776
- Price to Rent Ratio: 26
- Monthly Apartment Rental Income: $2,392
- Apartment Cap Rate: 2.8%
Honolulu is not just a hot vacation destination. It has a large population of long-term residents as well, and 58% of them are renters. For that reason, a good fraction of the Honolulu housing market is apartment complexes (60%). Although the median property price is quite high compared to the other real estate markets listed, remember that Hawaii is generally a more high-value market and multi-family properties can be more expensive. However, higher rental income makes up for it.
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5) Baton Rouge, LA
- Median Property Price: $149,287
- Price per Square Foot: $117
- Price to Rent Ratio: 12
- Monthly Apartment Rental Income: $1,060
- Apartment Cap Rate: 2.6%
If you’re searching for a strong housing market for apartment investing in Lousiana, Baton Rouge is a solid option. The median property price for Baton Rouge real estate is quite affordable and property investors can still find below-market value properties in this city. But this real estate market is starting to get competitive so investors should make a move fast.
Related: Which Apartment Amenities Should Investors Spend Money On?
6) Sandy Springs, GA
- Median Property Price: $218,936
- Price per Square Foot: $175
- Price to Rent Ratio: 11
- Monthly Apartment Rental Income: $1,714
- Apartment Cap Rate: 2.9%
With more than half of the Sandy Springs housing units being apartment complexes, real estate investors are looking at a good market for their strategy. This is a solid location for apartment investing with strong apartment cap rates and high rental demand (54% renters).
7) Bradenton, FL
- Median Property Price: $219,740
- Price per Square Foot: $154
- Price to Rent Ratio: 12
- Monthly Apartment Rental Income: $1,513
- Apartment Cap Rate: 3.1%
This is a market appreciating quite well with median home values up 4.7% over the past year. Steady cash flow gives those of you interested in apartment investing a good average cap rate in 2019. However, start your search for apartments for sale sooner rather than later as this is a seller’s market.
8) Scottsdale, AZ
- Median Property Price: $485,969
- Price per Square Foot: $309
- Price to Rent Ratio: 18
- Monthly Apartment Rental Income: $2,217
- Apartment Cap Rate: 2.7%
The Scottsdale housing market is finishing off our list of the best cities for apartment investing. With a total apartment unit inventory of 25,128, there is plenty of apartment investing opportunity here. These units generate a good level of rental income and real estate investors can be confident with an apartment investment in Scottsdale.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.