For investors who are still looking for value opportunities in an era where there’s an excess of capital—both domestic and international—it’s more important than ever to be selective about choosing new assets in the Sun Belt. Here are four southern U.S. cities attracting value-add multifamily investors.

A Banner Year

By all measures, 2021 was a banner year for the multifamily market, with a record level of $335 billion invested in multifamily assets, according to CBRE—nearly twice the volume of 2019. Bolstered by the economic recovery, shifts in spending and saving habits and the ability for many to work from home or remotely, average rents soared beyond their pre-pandemic levels in almost all major U.S. markets.

The pandemic also created a significant population migration from the Northeast and West to the Southeast—particularly to cities with less dense suburban environments and faster-than-average job growth due to a business-friendly environment.

Although Austin, Orlando and Phoenix are among the chief beneficiaries of this trend, Austin’s multifamily market is too hot to touch for many value-add multifamily investors seeking opportunities in the Sun Belt. The same is true for Phoenix and Orlando, where acquisition prices are rising faster than their temperatures. So I have focused on cities where there are still value opportunities to be found in the multifamily sector.

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The three Sun Belt metros that rank highest on my list, for a variety of reasons, are Charlotte, Tampa and Dallas. And while not technically in the Sun Belt, Richmond, Virginia, is now back on my radar—and I’ll explain why.

1. Charlotte

Demographic trends provide strong support for this fast-growing North Carolina market. The city’s population increased nearly 20% in the past decade, according to U.S. Census figures—more than double the state’s rate. Additionally, the median age within the city is 34.4. A surprising fact: Charlotte is one of the top 10 U.S. cities for attracting millennials, according to a 2020 report from SmartAsset.

Charlotte is a magnet for energy, technology and financial services jobs, as it is the U.S.'s largest banking center outside of New York. It’s also home to seven Fortune 500 companies and boasts a lively cultural sports scene, including the Carolina Panthers (NFL) and Charlotte Hornets (NBA).

As for the apartment market, average rents increased by 17.6% year over year as of November 2021, according to Yardi, reaching $1,464 per month, just slightly below the $1,590 national average. In terms of supply, developers completed 9,617 units by November 2021, but in-migration is likely to support continued rent growth.

2. Tampa

Tampa is well-positioned to be the hottest multifamily market in Florida for the next few years. According to U.S. Census figures, the Tampa metro area (Hillsborough County) grew by 230,000 residents in the past decade, with another 126,000 newcomers projected by 2024. In addition, the region’s diversified economy is creating tens of thousands of additional jobs in professional, business and financial services, as well as hospitality, construction and healthcare. Long-term economic drivers include the Port of Tampa and MacDill Air Force Base, as well as seven Fortune 500 companies.

Apartment rents in the Tampa metro rose 24.6% year over year as of December 2021, according to Yardi Matrix. It’s no surprise that multifamily development is booming, with about 5,700 units expected to come online this year. But investors may not realize that much of the new construction is in the luxury segment, creating an opportunity for rental communities catering to working-age individuals and families.

3. Dallas

You don’t need to be a Dallas Cowboys cheerleader to root for the Big D’s multifamily market. From February 2020 to November 2021, Dallas ranked no. 4 in U.S. job markets as major employers like CBRE and Charles Schwab moved operations to the region. A number of businesses are also planning to move to Dallas in the year ahead. That dynamic business growth is attracting millennials and other workers to Dallas, strengthening the already high demand for affordable residences.

Dallas-area apartment rents are also rising fast, reaching an average of $1,454 in January of 2022, up 18.2% from a year prior, according to the latest data from RealPage (paywall). With strong fundamentals driving growth, the average rent is forecasted to climb another 6.2% in 2022, with occupancy expected to hit 95.7% by the end of the year.

4. Richmond

Looking for hot markets beyond the Sun Belt? Consider Richmond, which is regularly ranked one of the best places in the U.S. to retire, with a moderate climate and high quality of life.

Biotechnology, manufacturing, finance and insurance are mainstays of Richmond’s economy, as the metro area is home to 12 Fortune 1000 companies as well as noteworthy attractions like the Virginia Museum of Fine Arts and the American Civil War Museum. In 2019, Richmond was ranked as one of the nation’s top 10 mid-sized cities of the future by fDi Intelligence for its economic potential, human capital and lifestyle.

Richmond’s multifamily market recorded strong growth during the pandemic, with average rent climbing 14.68% year over year by December 2021, to $1,469 for a one- bedroom apartment.

Focus On The Fundamentals

Multifamily investing is not an esoteric discipline requiring mastery of some new scientific or technological application. Instead, it involves careful research into local markets with a focus on the fundamentals of demand and supply—especially in the hottest markets of the Sun Belt.

Today’s migration and employment trends are likely to continue in the post-pandemic era, making cities like Charlotte, Tampa, Dallas and Richmond attractive markets for multifamily investors seeking to maximize their potential income streams and overall returns.