5 Multifamily Properties Under $5 Million in Rent Growth Markets
Rent growth in the U.S. multifamily market has slowed significantly since reaching a peak of 10.9% year-over-year in Q1 of 2022, according to data from CoStar, LoopNet’s publisher. And with plenty of new supply continuing to hit the market in the coming months, that trend appears poised to persist throughout 2023.
Yet some markets, mostly in the Midwest and Northeast, continue to see rent growth above the national average of 1.2%, at least for now. For investors seeking upside in the multifamily sector, LoopNet has compiled a list of properties available for under $5 million in five markets where rent growth outpaced the rest of the country in Q2 2023.
One property was selected in each of the following markets:
- Cincinnati, Ohio – YOY rent growth as of Q2 2023: 4.3%
- Northern New Jersey – YOY rent growth as of Q2 2023: 3.9%
- Columbus, Ohio – YOY rent growth as of Q2 2023: 3.8%
- Norfolk, Virginia – YOY rent growth as of Q2 2023: 3.7%
- Boston, Massachusetts – YOY rent growth as of Q2 2023: 3.5%
While rent growth isn't the only data point investors should consider, it's still one of the most fundamental metrics used to gauge the overall health of a market. It also offers multifamily investors a relatively straightforward path to generating value with their properties, as leases turn over and market rents are achieved.
$4,450,000 – Hoboken, New Jersey
This turnkey, 10-unit building in the Northern New Jersey submarket of Hoboken comprises eight residential and two commercial lofts on a 25-foot by 100-foot lot. Built in 1901 and located four blocks from Church Square Park, the property underwent an extensive renovation at the end of 2017, and the listing broker says the high-quality finishes are a major selling point for potential tenants.
The property is currently fully leased, and all units are separately metered for electric and gas and have tankless hot water systems in place. All residential units also come with washer/dryer combos and private balconies.
Like many municipalities in Northern New Jersey, Hoboken benefits from strong tenant demand due to residents relocating from nearby New York City. Vacancy rates are currently near record lows, while asking rents have been hovering at twice their pre-pandemic average.
And the listing broker is optimistic about the prospect of continued rent growth in the market. “After posting an annual increase of 4.6% in the first three months of this year, rents are currently growing at 3.9% and are well on their way to [a] 10-year average of 3%,” said Liberty Realty.
$3,400,000 – Norfolk, Virginia
Harbour House, 337 West Bute Street
This 12-unit, 12,000-square-foot property was extensively renovated in 2022, but still has upside potential from below-market rents, according to listing broker Austin Newman, vice president at S.L. Nusbaum Realty.
At $3,400,000, or $283,333 per unit, the property boasts a 5.74% cap rate. However, Newman said that rate will likely increase along with the property’s net operating income, as the rent roll turns over this summer and new leases are secured at higher rates. “We’re not increasing the price, we’re just increasing the cap rate to make it more attractive,” Newman said in a conversation with LoopNet.
Like nearby Richmond, Norfolk attracts tenants looking for more affordable housing than in other neighboring markets, such as Charlotte and Washington, D.C. And while rent growth in Norfolk is slowing from unprecedented highs in 2021 and the first half of 2022, it is still well above the national average at 3.7%.
The property’s central location in Norfolk’s West Freemason Street Area Historic District is a major selling point, and means tenants are walking distance from the waterfront, Scope Arena, Tidewater Community College and several malls.
“It’s kind of like Shockoe Slip in Richmond,” Newman said. “Cobble-stone streets, little cafés. It has a really nice neighborhood curb appeal.”
Another major attraction located two blocks away is the 75,000-square-foot Blocker Norfolk family YMCA, which includes a gym, a state-licensed childcare center and a 2,000-square-foot Sentara physical therapy practice. The construction of a cruise ship pier at the foot of the nearby Nauticus naval museum has also sparked an increase in local tourism.
$2,450,000 – Boston, Massachusetts
This four-unit building in Boston underwent a total renovation in 2020, including additions in the rear and on the top floor. That means it is exempt from Mayor Michelle Wu's recently passed rent control legislation until 2035.
While Boston is one of the most expensive markets in the country when it comes to multifamily rents, with asking rents averaging $2,790/month, rent growth is still well above the national average at 3.5%. Supported by the area's top-tier knowledge economy and chronic undersupply of housing, multifamily demand has held up fairly well in Boston, with net absorption of around 4,800 units over the past year, according to data from CoStar.
This property is centrally located and is close to both the Airport T station and Maverick Square.
“East Boston is an outstanding area for investment because of its access to public transportation, shopping and restaurants,” said listing broker Scott Johnson, managing partner at William Raveis Real Estate, in a statement to LoopNet.
The building includes one unit with 3 bedrooms/1 bath, two units with 3 bedrooms/2 baths and one penthouse unit with 2 bedrooms and multiple decks. All units are leased until August 31, 2024, and the listing broker claims rents are projected to increase 10%.
Highlights include open floorplans, white shaker kitchen furnishings, new JennAir appliances, quartz counters, clean and crisp contemporary bathrooms, hardwood floors, in-unit laundry, decks and a rear yard.
$1,790,000 – Cincinnati, Ohio
Built 1880, this four-story walk-up in central Cincinnati features a retail unit on the first floor and 10 apartment units, with the possibility to convert the laundry studio into an 11th apartment, according to listing broker Russell Kitzberger at Keller Williams Seven Hills Realty.
The building’s mechanicals, windows, roof, water lines, drain lines and electrical panels were replaced between 2006 and 2016, and the box gutter system was replaced in 2022.
The lease for the retail space on the first floor was recently renewed to a tenant with excellent credit, according to Kitzberger. The 3,000-square-foot space has high ceilings and large windows and is built out for the tenant as a showroom, prep kitchen and meeting space for a baked goods supplier. The space is also ADA accessible.
All 10 studio residential units are leased, mostly on a month-to-month basis, with an average rent in the high $700s, Kitzberger said. The units have high ceilings and large windows and range from 400 to 1,200 square feet, with an average of 600 square feet. They have hardwood flooring and basic kitchens, meaning there is an opportunity to upgrade the kitchens and increase rents.
“The underwriting on this will need to be based on the new owners' modeling,” Kitzberger said, adding that an AirBnB or short-term rental model would maximize return on investment.
Cincinnati is the most affordable of Ohio's major apartment markets, with an average rent of just $1,203/month as of Q2 2023, according to CoStar. After hitting historic highs in 2022, growth is now moderating, currently sitting at 4.3% year over year, still significantly exceeding the national average.
The revitalization of Court Street has boosted this location immensely, Kitzberger said. He added that apartment demand is great in the area, and that the property also benefits from being directly across the street from Kroger’s world headquarters. The streetcar is at the end of the block and drops passengers off within walking distance from the Queen City’s three playoff-bound team stadiums, performing arts centers and concert venues.
$2,795,450 – Columbus, Ohio
Built in 1961, this offering includes two properties with a total of 16 units and eight surface parking spaces. Located in the Grandview/Upper Arlington area of Columbus, the properties are fully leased and underwent extensive renovations within the past year.
Improvements include new, enlarged kitchens with tile flooring and stainless-steel appliances, new bathroom fixtures and new carpet and light fixtures in the living rooms. Furnaces and AC units have also been updated.
With a net operating income of $158,502.29, according to the listing broker’s pro forma, the properties are being sold at a 5.67% cap rate.
At 3.8%, Columbus is among the top three markets in the Midwest region for rent growth, according to data from CoStar. Columbus' affordability, steady population growth and relatively limited deliveries over the past year contributed to a more modest deceleration in rent growth compared to peer markets and the U.S. overall.
The Upper Arlington submarket where this property is located is one of the few areas where rent growth was still near record levels at the close of the first quarter of 2023. Current rents at the property are between $1,000 and $1,350 per unit.
