The best state to buy multifamily properties depends on your investment strategy—but the fastest way to narrow it down is to pick the state (and metro) that matches your target cash flow and risk profile. If you want good cash flow and competitive rental yields, look for markets with competitive pricing compared to local rents, a strong job market, and high rental demand (often in Midwest and parts of the South). If you’re prioritizing long-term appreciation and an attractive location with a deep rental market, you’ll often see higher property values, lower cap rate, and less immediate cash flow (think coastal major cities like San Diego and San Francisco). Either way, the winners in multifamily investing are usually the same: steady rental income, solid occupancy rates, a diverse economy, and real rent growth supported by job growth, population growth, and a tight apartment supply.

For more details, keep reading.

How to Choose the Best State for Multifamily Investment (Cash Flow vs Appreciation)

A lot of investors search for the single “best” answer, but multifamily investment is more like choosing the best tool for the job. One state can be the best for cash flow, while another is the best for long-term upside.

Start with the two big paths

Most multifamily investors fall into one of these camps:

• Cash flow first: You want steady cash flow, stable rent yields, and a property that acts like a reliable income asset.

• Appreciation first: You’re willing to accept a thinner initial yield because you believe long-term property values will rise.

Neither is “right” for everyone. It depends on your time horizon, your financing, and whether you’re building passive income or trying to scale aggressively.

What “cash flow” states tend to look like

States that support stronger day-one cash flow often have:

• competitive pricing (lower property prices relative to rents)

• solid employment growth and a strong job market

• a reliable base of renters and rental demand

• a cost structure (taxes, insurance, maintenance) that doesn’t crush net income

These states may not be the most famous “major metros,” but they can offer high rental yields and good cash flow if you buy right.

What appreciation-heavy states tend to look like

States with prized coastal metros or constrained geographies often show:

• very high median rent (and sometimes high median one bedroom rent)

• a strong rental market due to housing shortages and high demand

• lower going-in cap rate because buyers bid up prices

• stricter regulation and higher operating costs (market-specific)

These markets can be an attractive market for long-term wealth building, but “great market” doesn’t automatically mean “great multifamily deal.”

The Multifamily Market Scorecard: Metrics That Actually Predict Performance

To compare states in a way that makes sense, it helps to use a simple scorecard. The goal is to find multifamily real estate investments where demand is durable and pricing still allows reasonable returns.

Cap rate and competitive rental yields

A cap rate is a quick way to compare income performance (net operating income vs purchase price). It’s not perfect, but it’s a helpful filter across a multifamily market.

• Higher cap rate markets often indicate better cash flow potential (but sometimes higher risk).

• Lower cap rate markets often indicate higher perceived stability or growth potential (but weaker cash flow).

What you want is competitive rental yields for the risk you’re taking—and that’s not always the same as “highest cap rate.”

Rent growth and consistent rent growth

Strong rent growth can make an average deal great over time, but only when it’s supported by fundamentals. Look for:

• consistent rent growth (not one-time spikes)

• a tenant base that can actually afford increases

• job and population trends that support continued demand for rental housing

Job growth and business sectors

Multifamily performs best when local income and employment are growing. A diverse economy matters because a single-industry city can boom and bust.

Look at:

• job growth and employment growth

• breadth of business sectors (healthcare, education, logistics, finance, manufacturing, tech, government)

• resilience during slowdowns (economic stability)

A state can have a strong headline economy, but the local metro is what you’ll actually experience as an owner.

Population growth and a booming population

A booming population and growing population tend to support higher rental demand, especially when housing supply can’t keep up.

Pay attention to:

• state-level population growth

• each city’s population trend (the city's population is what drives your rent pool)

• migration patterns tied to affordability and jobs

Supply: tight apartment supply vs new multifamily construction

Supply is the silent deal-killer (or deal-maker). Two patterns matter:

• Tight apartment supply / limited apartment supply: Often supports stable occupancy and rent growth.

• New multifamily construction / multifamily construction: Can be healthy, but if it outpaces demand, it pressures rents and increases concessions.

The sweet spot is demand growing faster than supply—especially if zoning and permitting keep new units constrained.

Property values, sales comps, and the current market

Before you commit, confirm your pricing assumptions with:

• sales comps (true comparable properties, not “wish comps”)

• recent transaction volume (liquidity)

• your plan for stabilized operations (especially if you’re buying value-add vs stabilized properties)

A market can look great in national headlines, but the current market may be shifting fast.

If you’re planning to move to Western New York, or if you’re already a local resident, understanding multifamily investing and how factors like cash flow and cap rate shape market choices is just one part of your life in Western New York. For more helpful tips on real estate, be sure to check out our latest blog on Carol Klein WNY Homes, where we cover local housing insights and practical guidance for buyers and investors.

Cash Flow Markets vs Coastal Markets: San Diego and San Francisco as Reference Points

Let’s use San Diego and San Francisco as reference points—not because they’re automatically “best,” but because they show how different multifamily investing can look across major cities.

San Diego: attractive location, high demand, often tighter yields

San Diego is frequently considered an attractive location because:

• strong lifestyle and economic drivers

• historically strong rental demand

• high occupancy in many submarkets

• constraints that can contribute to long-run pricing support

But the tradeoff is usually:

• higher property prices and property values

• lower going-in cap rate

• more competition for deals and tighter margins for error

This can still work for investors who:

• have patient capital

• prioritize stability and long-term growth potential

• can operate efficiently to protect net income

San Francisco: premium pricing, huge rents, but complex risk factors

San Francisco often has:

• very high median rent

• deep renter demand in certain cycles

• strong long-term economic engines

But it also tends to come with:

• extremely high purchase prices

• regulatory complexity

• higher operating costs and uncertainty depending on policy environment

For some investors, it’s still an attractive option. For others—especially those building a portfolio for immediate cash flow—it’s not the best match.

Why this comparison matters

These coastal markets are helpful benchmarks because they highlight a common truth: a market can have high rents and still deliver weak cash-on-cash returns if pricing is even higher. That’s why investors compare:

• rent-to-price ratios

• cap rates relative to the national average

• stability of occupancy and rent growth

• future supply constraints and demand drivers

States and Metro Types That Often Produce Strong Rental Demand (Students, Jobs, and Infrastructure)

Now let’s talk about the kinds of states that often perform well for buy multifamily properties, without pretending there’s one perfect answer.

Job-driven states with steady economic growth

States with steady economic growth and a strong job market tend to support:

• consistent renter household formation

• stable rental income

• strong occupancy rates

Look for metros with expanding employers across multiple business sectors, not just one boom industry.

Education anchors: student renters and student housing

College towns and “eds and meds” metros can be surprisingly resilient. Areas with:

• large universities

• stable enrollment demand

• major hospital systems

…often have a built-in base of student renters and demand for student housing.

For example, the presence of Ohio State University can influence demand patterns in its region, supporting a year-to-year rental base even when other sectors soften.

Affordable housing dynamics and rental housing shortages

In many states, affordable housing constraints and housing shortages create a durable need for rentals—especially workforce apartments.

When homeownership becomes less attainable, more households remain renters longer, which can boost:

• demand for rental properties

• rent stability

• occupancy

Infrastructure improvements and emerging markets

Some of the best risk-adjusted opportunities show up in emerging markets where:

• wages are rising

• new employers are arriving

• there are visible infrastructure improvements (transit, highways, downtown investment)

These changes can make a market “new” and attractive—but you still have to underwrite carefully. Emerging doesn’t mean guaranteed.

Major metros vs other markets (and why Twin Cities comes up)

Some investors target major metros for liquidity and depth; others prefer other markets where pricing is lower and yields are stronger.

The Twin Cities (Minneapolis–St. Paul) often gets mentioned in market conversations because it’s a large metro with a diverse population and economic base—useful traits for multifamily stability. Whether it’s best for you depends on pricing, rent levels, supply, and local rules.