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12 Best Multifamily Markets for 2021 with High Cap Rates

by Charles MburuguNov 21, 2020December 7, 2023

The multifamily real estate market has been affected greatly by the coronavirus pandemic. The impact has been felt by real estate investors, tenants, and property managers alike. At the same time, a multifamily real estate investment in the right market can still be profitable in 2021. Mashvisor can point you in the direction of the best places to invest in real estate for 2021 if you’re looking for multifamily homes for sale.

But before we dive into that list, let’s take a look at how COVID-19 has affected even the best multifamily markets in the US. We’ll also walk you through some of the recent trends that have emerged as a result and offer a few reasons why, despite the pandemic, multifamily homes will still be good investments next year.

How COVID-19 Has Impacted the Multifamily Real Estate Market

It’s important to know the impact of COVID-19 on multifamily markets before investing next year.

Here are some of the notable effects of COVID-19 on the multifamily property market:

Loss of income – One of the main impacts of the coronavirus pandemic has been a massive loss of jobs. Millions of Americans have filed for unemployment since the beginning of the COVID-19 shutdowns. Due to loss of income, many multifamily tenants have been unable to pay their rents consistently.
Eviction moratorium – A federal eviction moratorium was issued to protect tenants from being evicted due to nonpayment of rent. This meant the loss of income for many landlords due to unpaid rent.

A slow pace of construction – A survey conducted during COVID-19 by the Multifamily Housing Council revealed that most apartment developers were facing delays in construction. This is due to a lack of materials, moratoriums on construction, and permitting delays. Social distancing rules have also limited the number of people that can work on multifamily projects at a time.
Low inventory levels – According to the National Low Income Housing Coalition, the U.S. needs over seven million extra affordable rental units in order to meet the current demand.

Multifamily Housing Trends That Have Emerged in 2020

Here are some of the multifamily housing trends that have emerged during the pandemic:

Demand for workspaces – One survey revealed that 4.7 million Americans were already working from home even before coronavirus struck. This number has increased significantly over the past few months. As a result, more people are now looking for spaces in the best multifamily markets where they can work remotely and comfortably.
Demand for extra amenities – Due to COVID-19 health protocols, tenants of multifamily properties are now demanding amenities that would make their stay safe and convenient. For example, they want spacious recreation rooms, gyms, parks, and rooftop decks that allow social distancing. Since most people are working from home, properties in the best multifamily markets will also need to have cable TV, high-speed internet, and an in-building convenience store.
Growth of suburban rental markets – With more companies allowing their employees to work from home, many Americans are now moving away from big cities to the suburbs. This allows them to pay lower rents and have bigger spaces.
A shift to contactless interactions – Because of coronavirus, there is a need to limit person-to-person interaction with tenants. As a result, property managers and landlords are increasingly using technology for virtual home tours, automated self-leasing, keyless entry, and automatic rent collection.
Rising rents – With the shortage of available multifamily units across the country, rents are expected to continue rising in 2021. According to a recent report, the best multifamily markets with the highest year-over-year rent increases are the St. Louis, Virginia Beach, Albuquerque, Santa Ana, Mesa, and Las Vegas real estate market.

Is Investing in Multifamily Homes in 2021 a Good Idea?

Generally speaking, yes – multifamily homes will still make a good investment next year. With talks of a vaccine, it’s likely many of the above-mentioned effects of COVID-19 will (eventually) disappear during 2021. Additionally, multifamily homes have proven to be quite resilient in the past when faced with economic uncertainty.

The key is to do your due diligence. Choose real estate markets where multifamily homes have continued to generate revenues for their owners during COVID-19. And those markets are listed below.

The Best Multifamily Markets for 2021

If you are thinking of investing in multifamily homes in 2021, look for the best multifamily markets that have high cap rates. Here are some of the best places to buy multifamily properties based on data from Mashvisor’s multifamily investment calculator:

#1. Manchester, NJ

Median Property Price: $113,417
Price per Square Foot: $95
Price to Rent Ratio: 6
Monthly Traditional Rental Income: $1,467
Traditional Cap Rate: 11.8%

#2. Napes, FL

Median Property Price: $377,410
Price per Square Foot: $193
Price to Rent Ratio: 10
Monthly Traditional Rental Income: $3,252
Traditional Cap Rate: 8.6%

#3. Cincinnati, OH

Median Property Price: $235,051
Price per Square Foot: $260
Price to Rent Ratio: 15
Monthly Traditional Rental Income: $1,310
Traditional Cap Rate: 6.3%

#4. Fort Wayne, IN

Median Property Price: $93,100
Price per Square Foot: $57
Price to Rent Ratio: 10
Monthly Traditional Rental Income: $768
Traditional Cap Rate: 6.3%

#5. Detroit, MI

Median Property Price: $153,275
Price per Square Foot: $60
Price to Rent Ratio: 14
Monthly Traditional Rental Income: $923
Traditional Cap Rate: 6.1%

#6. Baltimore, MD

Median Property Price: $301,970
Price per Square Foot: $142
Price to Rent Ratio: 16
Monthly Traditional Rental Income: $1,575
Traditional Cap Rate: 5.9%

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#7. Cleveland, OH

Median Property Price: $118,551
Price per Square Foot: $57
Price to Rent Ratio: 12
Monthly Traditional Rental Income: $846
Traditional Cap Rate: 5.6%

#8. Syracuse, NY

Median Property Price: $136,489
Price per Square Foot: $60
Price to Rent Ratio: 11
Monthly Traditional Rental Income: $1,068
Traditional Cap Rate: 5.5%

#9. Akron, OH

Median Property Price: $111,667
Price per Square Foot: $56
Price to Rent Ratio: 11
Monthly Traditional Rental Income: $859
Traditional Cap Rate: 5.4%

#10. Rochester, NY

Median Property Price: $134,168
Price per Square Foot: $60
Price to Rent Ratio: 11
Monthly Traditional Rental Income: $1,024
Traditional Cap Rate: 5.3%

#11. Jacksonville, FL

Median Property Price: $214,646
Price per Square Foot: $126
Price to Rent Ratio: 15
Monthly Traditional Rental Income: $1,215
Traditional Cap Rate: 5.1%

#12. Green Bay, WI

Median Property Price: $191,380
Price per Square Foot: $88
Price to Rent Ratio: 12
Monthly Traditional Rental Income: $1,355
Traditional Cap Rate: 5.0%

Conclusion

Whether you are planning to invest in duplexes, triplexes, quadruplexes, or apartments in 2021, you need to be aware of current trends and areas with high multifamily cap rates. Finding the best multifamily markets will enhance your chances of generating a positive cash flow in 2021.

You can use tools like Mashvisor’s real estate heatmap, Airbnb calculator, and the Mashvisor Property Marketplace to find the best multifamily investment markets and properties. Sign up for Mashvisor now and get 15% off.

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