January 13, 2021

JF2325: 20 Markets to Buy Multifamily in 2021| Syndication School with Theo Hicks



In today’s Syndication School episode, Theo Hick discusses the best 20 markets to buy multifamily properties. He also shares the 3 rules that will keep your investments safe and sound no matter the current state of the economy. As long as you’re buying right, your deals will be well-maintained even during the time of economic uncertainty.

Theo based his list of 20 trending markets on the annual report put together by PWC and the Urban Land Institute. Over 3000 real estate professionals have been interviewed in order to put together an in-depth report.

To listen to other Syndication School series about the “How To’s” of apartment syndications and to download your FREE document, visit SyndicationSchool.com. Thank you for listening and I will talk to you tomorrow. 

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Theo Hicks: Hello, Best Ever listeners, and welcome back to another episode of The Syndication School series, a free resource focused on the how-to’s of apartment syndication. Although this will be released in about mid-January, this is my first time recording in the new year, so happy new year’s, happy 2021, and thank you for tuning in.

Today we’re going to pick up right where we left off in 2020 by talking about the how-tos have apartment syndications. Make sure you go and check out some of the older syndication school episodes that we released in 2020, and also in 2019, and maybe even 2018. I’m not sure how long I’ve been doing this for now, but lots of valuable information, as well as lots of valuable free resources to download. These are PowerPoint presentations, how-to guides, Excel template calculators, things that will help you along your apartment syndication journey.

Being the new year, I thought it’d be great to kick it off with an episode that talks about some of the markets to look into 2021. So 2020 has been a pretty crazy year. We talked about the impacts of COVID19 in real estate in general, and some of the projected changes. We did talk about some of the information on particular markets, but today I want to go through a list of some of the top markets to buy multifamily in in 2021.

Now, one of the things that we talked about a lot on Syndication School are these three immutable laws of real estate investing. And the entire concept behind these three laws, which as a refresher, are 1) buy for cash flow, not appreciation, 2) secure long term debt, and 3) to have adequate cash reserves. Now, the idea behind all these rules is that no matter what the condition of the overall real estate market is, you’re still able to maintain your existing portfolio, and then based off of the three rules, being involved with buying allows you to buy new deals. And so follow these rules all the time; you can buy deals during a recession, which we’re technically in right now, and the deals you bought prior to the recession we’ll at least maintain and not be completely destroyed during a recession. And again, when you think about these three laws, the whole point is that you can still buy real estate, you can still buy multi-family, you can still invest during these downturns, during these periods of uncertainty, as long as you’re buying right.

And what I’m going to talk about today is evidence of that point, that you can continue to buy during recessions, downturns, whatever you want to call it right now; we’ll call economic uncertainty. Periods of economic uncertainty. So this is based off of a very lengthy report, that’s over 100 pages long; I highly recommend reviewing it, and I’ll link to it in the show notes of this episode. It’s called The 2021 Emerging Trends in Real Estate. This is an annual report put together by PWC and the Urban Land Institute.

I really like this idea… They essentially interview a bunch of real estate professionals, and then the ones that they don’t interview, they’ll send surveys to. And they do this for over nearly 3,000 individuals. So they say that they interview 1,350 individuals, and then they surveyed another 1,600 individuals. These are people who own commercial real estate, or develop commercial real estate, work for some sort of advisory firm… They are passive investors in commercial real estate, they’re like investment managers, advisors, banks, lenders, homebuilders, land developers, REIT companies… It’s incredibly a broad spectrum of commercial real estate. And they ask them a bunch of questions on what they think is kind of going on, and then based off of the 3,000 or so responses they get, they put together this really detailed report. They also obviously pull data from the Bureau of Economic Analysis, US Department of Commerce, some of the big commercial real estate reporting firms out there, and they put together a really nice report.

And the one thing I wanted to focus on today, as I mentioned in the beginning, are what are some of the markets that we should be looking at in 2021? More specifically, what they did is they asked all of the respondents to let them know, “Okay, so based off of all these major metropolitan statistical areas, MSAs, would you recommend that people either A, buy, B, hold, or C, sell their properties?” And so for all the markets, they compiled all these responses. So out of 100, what percentage said that you should buy real estate in this market? What percentage said “Well, you shouldn’t buy. If you have an existing property, you should probably hold and not sell.” And then “No, if you hold property, you need to sell and get out of this market.”

So these are the markets that all these different active real estate professionals think and recommend that people buy in in 2021. So I’m going to go over those today. This is specifically for multi-family. They have a breakdown of the same survey for other commercial real estate niches, like office, and retail, which – for retail, obviously, not a lot of buy here; a lot of sell actually. They have the top 20 here for retail, and number 20 is 0% buy. And the most is Orlando, which is 28%  buy; it’s kind of interesting.

Same thing for hotel, and then they have other rankings for markets. But again, I want to focus on the buying multi-family. So according to these experts, what are the top 20 markets that experts are recommending that you buy in? And of these top 20, more than 50% of the respondents said you should buy multi-family. And to put that in perspective, for office, for retail, and for hotel – I think they have one other one on here, which is industrial. But for office, for retail, and for hotel, the number one market to buy in, for all three of those, is less than 50%. So office is 45% in Salt Lake City, Orlando, 28% for retail. And then for hotel, it was 23% at Fort Lauderdale.

And so the number one market to buy in for those three asset classes, so less than the top, say, 15 multi-family markets to buy in, with industrial obviously being kind of, in a sense, better and more attractive, and more recommended than multi-family. We’ve talked about it on the show in the past before. So without further adieu, let’s jump into these actual markets. But the whole point of that is just introducing the fact that hey, multi-family is doing a lot better than these other asset classes. And these experts are predicting that it’s still going to do well in 2021.

So number one is going to be Raleigh, Durham, North Carolina. 72% of the respondents recommended buying multi-family in Raleigh, Durham. 20% said you should hold, and 9% said to sell. So that’s the number one market.

The next two are tied for second. Still very high recommendation, at 67%, buy in Tampa, St Petersburg, and Salt Lake City. For Tampa, St. Petersburg, 30% recommended to hold, and 2% recommended to sell. For Salt Lake you have 27% hold, and 6% sell.

In fourth place is going to be Austin at 63% buy, 28% hold, and here we see a pretty high sell of 12%, relative to some of the other ones on this list. Only a few of them have a double-digit sell recommendation. But still the majority think that Austin is a good market to buy in.

This one kind of surprised me, but Boston comes at number five. Boston, Massachusetts at 60% buy, 32% hold, and 9% sell. Now, for some of these, they actually don’t add up to exactly 100%, right? 72 plus 20, plus nine is 101%. I think they rounded these without a decimal point. So they’re all within one percentage point of 100%.

Number six is going to be Boise, Idaho. Now, if you remember from some of the rent analyses that we did in late 2020, Boise, Idaho experienced the greatest rent growth out of any major market since the onset of the COVID-19. I’m pretty sure it’s a double-digit rent growth percentage. So clearly, Boise is going to be on this top list of places to buy, with 59% recommending to buy, 34% recommending to hold, and 6% recommending to sell.

Next we have Nashville, Tennessee, 59% buy, 37% hold, 4% sell.

Next, coming in at number eight we have a repeat in North Carolina this time, it is Charlotte, North Carolina at 56% buy 36% hold, and 8% to sell. Number nine, we’ve got our first repeat for Texas, which is San Antonio, which is 55% buy, 35% hold, and 10% – so another double-digit, but still relatively low to sell.

And then rounding off the top 10, which is one of the only places on this list where no one recommended that you sell – it was a 55% buy, 45% hold, Columbus Ohio. So no one recommended that you sell in Columbus, Ohio. So that is the top 10. Again there’s Raleigh, Tampa, Salt Lake City, Austin, Boston, Boise, Nashville, Charlotte, San Antonio, and Columbus.

So kind of really all over the country. A lot of southern states, but also you’ve got Boston which is Northeast, you’ve got Boise which is in the West, and then you got Columbus in the Midwest. So really kind of all over the place. It’s not necessarily focused on one particular section of the country.

So I’m going to quickly go through the next 10 to round off the top 20. So at number 11, Washington DC at 54% buy, 43% hold, 3% sell. 12, Fort Lauderdale – 53% buy… I’m just talking about the buy here. I want to do all this. So, Fort Lauderdale, it was 53% buy, 39% hold, 8% sell. Atlanta 53% buy, 33% hold, 14% sell. Phoenix 52% buy, 30% hold, 15% sell.

And then the last location that the majority of respondents recommending to buy would be the Inland Empire, which is parts of California, 51% buy, 42% hold, 7% sell. Now the last one, Phoenix – that actually has the highest of these top ones, highest percentage of sale; but obviously, they’re only featuring the top 20. A lot of these markets are going to have a pretty high sell, but they  don’t include those ones on the list. So of the top 20, 17% recommending selling in Phoenix; that’s the highest one.

Next we got Long Island at number 16, which is 46% buy, 54% hold, and then another 0% here for selling. So Columbus, also Long Island – they’re not recommending that you sell. Either buy or you hold. 17 is Cape Coral, Fort Myers, Naples, so third is Florida on the list, in addition to Tampa, St. Petersburg and Fort Lauderdale. It’s 44% buy, 50% hold, 6% sell.

Back to the Midwest in Indianapolis at 44% buy, 56% hold, and the third one on our list where no one says to sell, also in the Midwest (I guess Wisconsin is technically Midwest), Madison, Wisconsin, at 43% buy, 57% hold, another 0% sell. And then lastly, number 20 is Virginia Beach, Norfolk at 33% buy, 56% hold, and 11% sell. So those are the top 20 markets to [unintelligible [00:16:57].21] real estate, but multi-family in 2021.

Now kind of going full circle back to the beginning, back to those three unbeatable laws of real estate investing… Just because 72% of people say you should buy in Raleigh, Durham, it doesn’t mean you should buy every deal in Raleigh, Durham, right? You still need to do your market analysis that we’ve talked about before, and you still need to buy right, you still need to underwrite, you still need to follow the Best Ever practices we’ve talked about on this show. But at the same time, you want to set yourself up for success by buying in a solid market. So these are forecasts, right? These are recommendations from experts. These aren’t, again, guaranteed. Raleigh, Durham is not guaranteed to be the best market. It’s not like — in Columbus they say no one should sell, but then if you own a property in Columbus it doesn’t mean you shouldn’t sell, right? It all kind of depends on where you’re at in your business plan, and things like that. But at the end of the day, the idea behind all this is “Okay, here are some of the top-rated markets.” So if you’re in them, great. If you’re focused on them, great. If you’re not focused on them, you might want to consider looking into these.

I might do some future episodes going more in-depth on this report, because there’s a lot of solid information on here; it’s really long, and I don’t expect every single person listening to this to read all 112 pages. So maybe I’ll do that for you, and we can dive into this on future Syndication School episodes as it makes sense.

So yeah, thanks for tuning in. Make sure you download this report and at least go to the multi-family section of this report, or at least read the key highlights of the executive summary to get an idea of where we’re at as it relates to real estate in general… And more particularly commercial real estate, and even more particularly, multi-family real estate. This link will be in the show notes.

Until next week, make sure you check out some of the other Syndication School podcast episodes, download all those free documents that we have available as well at syndicationschool.com. Thank you for listening, as always have a Best Ever day, and we will talk to you tomorrow.

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