The multifamily outlook for 2019 suggests strong rents for investors though careful attention to demand and competition is important for making smart acquisitions and managing them well.
Rents Outpacing Inflation
US apartment rents seem to keep growing and even outpacing inflation. At least with few exceptions. Experts weighing in on this year’s forecast via National Real Estate Investor predict rents will grow at an average of close to 3% again in 2019. The best growth is expected in class B properties and more suburban neighborhoods, where older buildings provide investors with the great potential for updating. Some question how well the top end luxury market will do this year — a sector which could see data dampened by oversupply and affordability in the most expensive markets.
Average Rental Rates
According to Zillow, these are the average rental rates in some of America’s most notable cities.
- San Francisco $4,490
- Manhattan $3,400
- Miami $2,400
- Dallas $1,645
- Seattle $2,500
- Memphis $897
Who is Renting in 2019
Some of the most active renters signing new leases in 2019 are believed to be:
- Generation Z
- Low to middle-income earners (workforce housing)
Many boomers are downsizing. They may not perceive this as a good time to buy but will rent. Millennials were hoped to be the biggest buying force, yet, 90% don’t even have $10,000 saved for a down payment. Many regular workers will be forced to move this year as they will be priced out of their cities on renewal. Generation Z is finally hitting the market as a force.
2 Big Factors for Investors to Watch
The two biggest factors likely to impact investors versus their expectations are:
- Product-market fit
- Special deals being offered by the competition
Those with the rental product that renters want will have the advantage this year. Their units will move faster and attract the best tenants if priced correctly. Some data may also be skewed on the surface due to landlord specials. In NY this is stretching out as far as three months of free rent, plus other perks. Be sure to know what your competition is giving away to achieve those rents before diving in.
Of course, it can be more than a full-time job keeping on top of the market and positioning to move units fast to the best tenants, while keeping up long term value, which is why savvy investors look for a fully managed turnkey solution. Check out this post to find out what to look for in a sound and profitable multifamily syndication.
ABOUT THE AUTHOR
Bill Zahller is the President of Park Capital Properties and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Properties in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalProperties.com for more information.