One of the most important factors to analyze in order to select a target real estate investment market is supply and demand.
In general, the more demand there is for your product, the more you can charge. In the context of multifamily investing, the more demand there is for rental units in your target market, the higher the occupancy rate and the higher the rents.
One great way to measure the demand of multifamily rentals in your market is to determine the number of new units completed and the number of completed units that were rented. This measure is known as the absorption rate. The absorption rate is the ratio of the number of completed units rented to the total number of completed units. For example, if 100 units were completed and all 100 of those units were rented, the absorption rate is 100%.
Each quarter, CBRE releases their U.S. Multifamily Figures report, which tracks the absorption rate (among other factors) nationally and by metro.
In 2018, the total number of completions was 267,900 units and the net absorption was 286,600 units (which was the highest new absorption since 2000). That gives us a national absorption rate was 107%.
Here are the 8 markets with the most multifamily completions in 2018, along with the net absorption:
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Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.