We've got a special edition of Market Hunter Thursday with Herve. This is the beginning
of the year, we are putting 2020 behind us, we are looking forward folks to 2021. Specifically,
what we want to go over today is how I'm thinking about top five cities to invest in from a
multi-family perspective in 2021. You're going to see a lot of these top five, top 10, top
20 lists over the next few weeks. They're going to be variants of each other. There's
going to be different factors that drive those top lists and things like that. I'm going
to go specifically in the Rs. You guys know as a backdrop that we focus pretty much on
C-type assets, value-add, turnaround and we go ahead and we reposition to B, B+ assets,
and we focus specifically on secondary and tertiary markets because we believe that's
where we can generate the best value for our investors.
We're going to see industries really start to come back to life that were really adversely
affected by the pandemic last year. When you start talking about restaurants, hospitality,
accommodation, even when you start talking about construction and retail, shopping malls
were complete ghost towns in 2020. So that's why I'm so pumped up. I'm so bullish for the
commercial real estate market going into 2021.
When you think about geography wise, before going directly into the cities, we're going
to continue to believe that the best opportunities for investors are going to be in the Midwest
and the Southeast to outperform and give you outsize investment opportunities. Because
a lot of the migration going into those areas, specifically from folks in the Northeast,
such as states as mine, New Jersey, as well as New York, Connecticut, and so on and so
forth. So folks let's go ahead and dive in.
All right, top five cities, no particular order. We're going to kick off with Jacksonville,
Florida, right down south. You'd be surprised that over the past couple of years Jacksonville
has had 55% more people move into their city versus out of their city. That's the fourth
highest in the country. A lot of folks will also be surprised that Jacksonville, believe
it or not is actually the largest city in the state of Florida with a population over
920,000. And that growth rate is about one and a half to 2% per year. What makes the
city very attractive for multi-family investors is that the median value of a home is about
202,000 in Jacksonville. That's 36 times higher than the median value for rent, which is 1,024.
When you put that against a median income of 35,000, it makes sense that people are
more attracted to renting versus buying specifically in that area. And obviously we're not talking
about the coast of Jacksonville. We're talking about a little bit more inland.
On industry diversification in Jacksonville, even though they do sit right on the water,
another magnet that drives people into the area is job diversification into the area.
It's made up of industries such as healthcare, retail, finance, hotel, education, and construction
with no one industry representing more than 15% of the total job market in that area.
So these are the four factors in which I'm going to be bracketing my top five picks.
When you start talking about migration, population, median rents and home values. And then lastly,
industry diversification.
My number four city in the same sunshine state, Tampa, Florida, right? Okay. On the Northwest
side. So Tampa, Florida, again, on a migration standpoint, when it comes to Tampa, they rank
fifth in the country with total net migration of nearly 42,000 new residents or 115 people
moving into Tampa every day. Better move over, folks are moving into Tampa. That came in
just behind Atlanta.
On population Tampa is the third largest city in Florida behind Jacksonville or Miami, with
a population of 414,000. So good number of folks there, or for tenant size for your multi-family
investment. Median rents, median income. The value of a home in Tampa, a little more than
215,000. Rent is right around $1,100 on a median rent size. So similar to Jacksonville,
it does make it expensive to purchase single family homes in Tampa. And on top of that
you got median income of 36,000. So you're going to have a good base of renters that
live in Tampa. You've got nice migration of population coming into Tampa.
Number three, we're going to go down to big state, Texas, specifically San Antonio, Texas.
Between 2010 and 2019 San Antonio had a net migration of 260,000 people. That puts their
population, right now it's the second largest city in Texas, I bet you guys didn't know
that, with a population, 1.6 million people. They are experiencing a high birth rate, a
low death rate, again, like what I said about migration. So many folks moving in, not only
from the East Coast, specifically from the West Coast. Again, median rent, median value
of a home in San Antonio about 160,000 where the median rent is a little more than 1,200.
So home ownership in San Antonio, a little bit more affordable than in Jacksonville and
in Tampa, which makes it even more attractive place for folks to move in. You do have median
income in San Antonio of $34,000.
So specifically for San Antonio I'd recommend investors really focus on type C properties
that could reposition up to a B, B+, because it could be difficult to be finding tenants
there that qualify for the typical three times rent based on income levels, especially since
the median income is 34,000. Again, that just tells you half of the population in San Antonio,
it makes over 34,000, the other half makes less than 34,000, right?
City number two on the list. Huntsville, Alabama. I don't know why when I talk about Southern
cities I got to use a Southern accent. I think it just kind of goes with the flow, right?
I mean, you start thinking barbecues and just big things. But Huntsville, Alabama. City
number two. They ranked first in their state on net migration, over 6,000 folks between
2018 and 2019. Huntsville has a population just over 200,000, has been grown about one
and a half percent each year for the past nine years. So consistent population growth
on a metric that we really like to see in Huntsville, Alabama.
Huntsville has a very high median income. A lot of folks will be surprised about that.
Why? Because you have a lot of high tech, science and engineering and research jobs
in Huntsville. You have a lot of employees down there for NASA, median value for a home
in Huntsville is just under $200,000. But guess what? Median rent is $800. So home ownership
a little bit more affordable in Huntsville. And again, that median income of $54,000.
Again, that compares let's say to a San Antonio of $34,000. And again, because of the concentration
of high tech jobs. All that being said however, no one industry makes up more than 15% of
the total jobs in Huntsville. Those industries are professional jobs. Like I was saying,
the engineering, healthcare, retail, manufacturing, public service, and a combination.
And the number one city coming out of Market Hunter Thursdays with Herve. And I might be
a little bit biased here, because this is from my original hometown. At least where
I went to high school, Baltimore, Maryland. I know you guys are shocked it's not south.
I didn't say it with a Southern accent, because it's not south. Although it's weird because
folks way up north really believe that Maryland is a Southern state. But folks in Maryland
think that Maryland is kind of the Mid-Atlantic state because we sit right there on the Mason-Dixon
line.
But Baltimore, Maryland, and specifically I would say the outskirts of Baltimore, Maryland.
Since 2010 the population of Baltimore has increased 3%. It is a little bit slower than
the national average, but it's steady population growth year over year. You have a good population
of Baltimore, over 700,000. You have median rent. The home values are 18% above the median
home value nationwide. The average rent are about $1,500 a month, which is less than 1%
of the median home values of $160,000. So you got a nice price to rent ratio in Baltimore
that gives you an idea that the real estate market over there has a better opportunity
for our cashflow.
From an industry diversification, again, no one industry making more than 15% of total
revenues, but John Hopkins is the largest employer in Baltimore as healthcare represents
close to 20%. So yes, close to 20% of total industry jobs. Other industries are educational,
retail, professional services.
So as a recap folks, my top five cities, Jacksonville, Tampa, San Antonio, Texas, Huntsville, Alabama,
and lastly, Baltimore, Maryland. I think that again, if you approach your investing, just
to give yourself a little bit of hedge, give yourself a little bit of cushion in particularly
targeting the C type assets in those respective cities, where you could get a great contractor.
You get a great property manager that's going to help you reposition that asset to a BB+
asset. You're going to get some nice, nice cashflow. None of these cities that I mentioned
are cities in which you're going to be pursuing an appreciation strategy for your multi-family.
You're going to be targeting a cashflow strategy. That's the number one way we believe to go
ahead and make money in multi-family steady Eddy cashflow growth.
Take the benefits of the population growth, migration into the cities. Take a look at
the median income, median home values and median rents of those cities. And then lastly,
industry diversification. We don't like investing in cities in which one or two industries is
the dominant job filler for that particular city, which is why we stay away from cities
such as Orlando and Las Vegas.
So folks, listen, I'm going to leave it there. That's a lot. Definitely go and work, go and
chew on it. I wish you guys nothing but great, happy, healthy New Year and have a lot of
fun investing. We're going to be back. We're going to be back with more information, with
more research, with more data to support these cities that we just told you about in regards
to our top five, specifically in regards to maybe a next segment, how do you go and target
some of these commercial brokers in these five cities that we talked about?
There are a bunch of other good cities that you can add on to this list. This is just
some of what of our research have poked out. Again, leave us a comment below. Please subscribe
to our YouTube channel. If you have any questions, reach out. I wish you guys nothing but the
best. Healthy, successful, safe investing this year. This is Herve Francois, Market
Hunter, out. Take care.