For investors who are finding it consistently challenging to find good multifamily deals in locations that they might want to start or grow their real estate portfolios, the Midwest has always offered a better bang for your buck. And, nowadays—as the housing market continues to surprise even the most seasoned real estate investors—this region of the United States is getting much more attention.
The downside is that it can be burdensome to do the process of investing from start to finish, especially if this is unmarked territory for you. From finding the right multifamily dwelling, to the massive amount of work that needs to be done, to listing it and finding tenants and keeping up occupancy rates, would-be investors might decide that sitting this one out might be preferable to what you’d end up making off an investment here.
But, there are some shortcuts out there, so that you can capitalize on undervalued multifamily properties in the Midwest without needing to do the work yourself.
From homes listing at half the price of the median price nationwide, to a growing population that’s the result of much more desirable lifestyle, the Midwest is an attractive option for people from larger coastal cities to start anew. This is also in-part due to the rise in remote work giving people the option to relocate, giving new arrivals a relaxing lifestyle here over the grind in New York City or the increasingly unaffordable cost-of-living in San Francisco. These cities also have a growing job market that’s provided locals with an opportunity to live a better quality of life.
Why Invest in Multifamily Real Estate in the Midwest?
Throw in the continuous pandemic, a supply shortage, massive inflation, and the overall unpredictability of the housing market, it’s no wonder the Midwest seems like the only place left to invest without major risk.
Multifamily Real Estate, Millennials & the Midwest
Aside from the pull factors mentioned as well as the numbers, we know that the housing shortage as well as the inability for most Millennials—the largest population—to attain home ownership is a contributing factor to the growth we’re seeing in the Midwest.
Generally, this type of growth creates the need for “workforce housing.” The term refers to high-qualified tenants who may work in factories or distribution warehouses, healthcare facilities, schools, etc., and want an affordable and nice place to rent, in safe neighborhoods while also being close to their jobs, amenities, public transportation (if need be), and things to do.
From an investor standpoint, it is possible to find an undervalued property that would easily check off the boxes for these tenants, and would be money in your pocket, too. However, the opportunity tends to come in the form of vintage homes that need a lot of work, time, and capital.
But, compared to what the cost would be to build similar properties of the same size from the ground up, it’s a no-brainer. The result is returns that you wouldn’t see elsewhere, which comes from stable tenants who are willing to pay higher rents for the right place to call home.
Let’s talk numbers.
Not convinced yet? While a good cap-rate on an investment property—specifically a multifamily, which still has the most profitable potential if done right—is between 4% and 7%. Though 10% cap rate is a thing of the past, the latter is still hard to come by in most markets.
But, not in the Midwest. Now, there’s a continuous demand in rental units here, which can often be maximized in multifamily homes. And, investors are seeing a major return—a 10% cash-on-cash yield in some cases.
Take Your Pick: How to Maximize Your Investment on Multifamily Properties in the Midwest
Unfortunately, we all know that the amount of work that goes into overhauling a major undervalued multifamily asset before you actually see results, leads many to give up before they’ve even started. The only way to do it would require you to find a balance of snagging the investment without tiring yourself out or exhausting your capital.
1. Do your research.
Many experienced investors do purchase properties sight unseen. And, just from doing desktop research, it’s not difficult to run the numbers and see what multifamily prices are going for in relation to the rents in those areas. You can also take a look at the growth data in these cities, and learn about where they are projected. And, what about any big businesses potentially moving in? Spend some time to dive in deeper to ensure what you hear is not just chatter, but legit.
And, if you’re not so confident investing here, an investment group like GSH does this for you, taking out one (or, three) crucial aspects (“location, location, location!”) in choosing a multi-family investment property.
2. Be open-minded.
In the Midwest, there are many hidden gems in old properties that just need a little TLC. And, unlike other markets, an undervalued home in the Midwest is usually just that—not a catch. By being open-minded and putting yourself in the shoes of the potential tenant, you won’t have to worry about missing out on an awesome deal.
But, again, even investors who do this for a living don’t always have the time nor patience to look for these potential properties. You’ll have to find trusted professionals that can do the work for you.
3. Look for an investment group.
Finally, if you see the value of finding and investing in multifamily communities in the Midwest but you’re feeling overwhelmed, look to an investment group to do the work.
How to Choose the Right Multifamily Real Estate Investment Group
There are many real estate investment groups out there, making it hard to choose the right one for you. Part of the benefit of doing the work yourself means you can have control over what happens, and going with an investment group means giving up some of that control. But, what if the experience could be more of a collaboration?
When choosing an investment group to help you find a multifamily property, you should ask some key questions:
- What’s your portfolio like?
- What’s your industry experience like?
- What’s your experience like in the area?
- How well do you know the area?
- What type of return can I hope to see?
- Is the company ethical?
- How can I know how my investments are doing?
Here at GSH group, you can get the benefits of owning cash-flowing real estate without the burden of being a landlord for a multi-unit property.
We take a concierge approach from start to finish, while also being transparent with you about how your investment is doing. Let us do all the work and management, and let you reap the benefits at a much more moderate price point.
GSH Group is an investment group that works exclusively with investors who want to see ROI from undervalued multifamily investments in the Midwestern market. Doing it this way means you can sit back and relax while we do all the work for you.