Some places across the country are notorious for expensive housing. For example, in San Francisco, the median rent is $4500 – well out of range for much of even the middle class – compared to the $1,637 national average. If you’re thinking about buying or building a multifamily investment property, understanding how much people are paying for rent will be critical to your profits and success. Here’s what you need to know.
New York City
The most populated city in the US, New York City, is home to more than 8.5 million people crammed into 305 square miles of space. There is simply not enough housing for everyone, and because of this, the demand is so high that rents have raised astronomically over the last few decades. The median rent for a studio apartment in NYC is $2,595. Those who already own properties in NYC – and those who can purchase properties at affordable prices – stand to profit from those rental properties for many years.
Los Angeles
The population of LA stands at just under four million, and rents here have risen by 65% in the last 10 years – and they continue to climb. In fact, in late 2019, California passed a bill to cap annual rent increases at 5% in order to prevent people from finding themselves without a home to call their own. The median household income in LA is $64,036, and the average rent here is $2,527.
Chicago
As the third most populated city in the nation, Chicago is home to a little more than 2.7 million people. Surprisingly, average rents in Chicago – both in the city and in the suburbs – are in line with the national average at roughly $1,131 a month. It is important to know that according to Census ACS data, rental vacancy rates in Chicago were 6.32%, and that number continues to increase slightly every year.
Houston
Some 2.36 million people call Houston, Texas their home. The average rent for a two-bedroom home in Houston is $1,446 and the average for all rental properties is $1,338. Houston’s Rice neighborhood boasts the highest rents at $2,195 a month while the Northeast area has the lowest rent at just $839 a month. Rents increased dramatically in 2018 across the city and will continue to do so due to things like oil and gas prices, interest rates, property taxes, and more.
Phoenix
Hot and sunny Phoenix, Arizona is home to 1.6 million people, and it’s increasingly popular among retirees who want to enjoy warmth in the sun year-round. Rent prices here are lower than the national average $1,123, but Phoenix was once known for its rather low rents, and this number represents a 10% year-over-year increase in rent costs. About half of all Phoenix apartments rent for $1,001 to $1,500 – well below or right at the national average.
If you’re considering multifamily property investing and you’re still unsure of the location, it’s important to consider factors like demand and average rent price, but you should also consider average income, property tax rates, and insurance rates. It is the combination of all of these that will ultimately help you determine your profitability.
