- Real estate investment platform Cadre has identified the most valuable places to invest right now.
- Founder Ryan Williams calls these cities in the Southeast “business friendly” and “affordable.”
- Insider specifically looked at the top 3 metro areas to invest in multi-family properties.
Institutional money has made big waves in residential real estate over the past year, with each quarter seemingly setting a new record for the number of houses bought by investors compared to normal individuals. A year ago, some of the most popular places for investors it included southern cities like Atlanta, Charlotte, and Jacksonville. And the evidence would suggest that this investment trend in the southern United States remains strong.
In a report recently published by real estate investment platform Cadre, the company identified today’s most valuable places (so-called MVPs) for institutional investment by comparing several key metrics, such as year-over-year rental growth, occupancy and average property. values, among other variables. Cadre selected MVP for three different asset classes: multifamily, office, and industrial. The firm also named a select few cities “triple crowns,” which are the metropolitan areas that made it to all three MVP lists.
The three cities that have been granted a Triple Crown designation are located in the Southeast: Raleigh, North Carolina; Charlotte, North Carolina; and Nashville, Tennessee.
Reviewing the data, Insider specifically targeted the top metropolitan areas for investing in multi-family properties, which Cadre defines as larger buildings with 50 or more residential units. Southeast cities dominated Cadre’s Multifamily MVP list, accounting for nine of the 15 selected markets.
There are three main similarities between these southern cities, said Cadre’s global investment committee founder Ryan Williams: “They’re business-friendly, with growing and expanding employment centers. Number two, they’re affordable, especially relative to rent in a place like New York or San Francisco or Boston. And then we’ve seen significant population growth in each of these markets.”
They also have low tax rates and good infrastructure, he added.
Raleigh, Charlotte and Nashville
Raleigh, Charlotte and Nashville are some of the fastest growing cities for industrial, commercial and multifamily real estate, says Williams.
For multi-family assets, the firm is “optimistic in markets with long-term employment and population growth where apartment rents are priced more affordably than the price of home ownership,” according to Cadre’s recent report.
These fundamentals are what make these three metro areas strong candidates for continued investment in various asset classes, particularly residential real estate, in the coming years, he suggests. Having a diversified economy and local colleges to pool talent are just a couple of variables that make cities like Raleigh, Charlotte, and Nashville less susceptible to similar mini-booms and busts seen in other pandemic-era hot markets (Boise, as an example) where there was a dramatic rise, and an equally sharp decline, in investment and home values.
“There are other markets that saw a pandemic boom that I think are going to retract,” Williams said of some of the areas that were particularly hot in the last two years. “[In cities that were] Overbuilt and oversupplied, people need to be careful when investing from a multifamily perspective because you may not be able to generate enough steady cash flow or rental income to meet the new reality and the debt service side.”
Williams says his company is active not only in Charlotte, Raleigh and Nashville, but most of Cadre’s real estate assets are in the MVP cities highlighted in his report.
“We spend about 80% of our time searching in those markets,” he says of the 15 metropolitan areas, which include Atlanta, Austin, Boston, Dallas, Denver, Las Vegas, Miami, Orlando, Phoenix, San Diego, Tampa and Washington. DC, plus the three triple crown cities. “But growth is the number one metric that we focus on.”
by the numbers
Overall, median home sales prices have skyrocketed in the three Triple Crown cities.
In Raleigh, the median home price is $397,000 as of September, up 9% from last year, according to data from red fin, which includes condominiums, single-family homes, townhomes, and cooperatives. Raleigh home prices, by Zillow, they are notched at a median of $451,332 as of September 30, up 20.2% from a year earlier.
In September, the median sales price in Charlotte was $385,000, with prices soaring 13.2% compared to last year, for red fin. According to ZillowHowever, prices increased slightly to $400,662 as of September 30, up 20.2% over the same time frame.
From an institutional perspective, acquiring multi-family properties in southern cities like Nashville, or in Savannah, Georgia, where Cadre owns a hotel, which have a strong tourism and service industry is a particularly attractive proposition in the post-pandemic world. , where people tend to spend more money on experiences and travel.
“We’ve seen a significant boom in markets that are those kinds of drop-in entertainment venues,” he explained. “And we think that’s going to continue, especially as people tend to shift from spending on goods to spending on services.”
Going forward, investing in the right places will be more important than ever, Williams said: “There are going to be multi-family homeowners or potential homeowners who will have a hard time buying more multi-family homes because there are so many challenges right now with leverage.” and debt, given where interest rates are.
Property owners will find it more difficult to maintain their occupancy and cash flow in markets where there is no strong demand or growth, or where there is excess supply, he explained.
As for markets where there is limited supply and significant demand, including Cadre’s MVPs, “I think you’re going to see some pretty significant investment prospects,” he said.