Multifamily real estate enables investors to quickly grow their real estate portfolio, even if their budget limits their choices to smaller buildings such as triplexes or quadruplexes. The investor may even move into one of the units and become an in-house landlord instead of maintaining a separate property.

The landlord role for a multifamily property offers some advantages over other properties. Leasing agreements for multifamily tenants are more accessible to prepare than for office or retail tenants, with fewer insisting on complex negotiations.

Investors who decide to shop for multifamily real estate will have to answer a single question before proceeding: Which cities offer the most potential?

Similar to residential real estate, multifamily properties with positive investment potential will be in areas with high demand for rentals.

With these and other factors in mind, we've compiled a list of some of the most attractive cities in the nation for this year's multifamily investors. A few of our picks may surprise you.

Raleigh and Durham, North Carolina, form part of the state's Research Triangle formed by three Tier 1 research universities. Raleigh is the capital of North Carolina, while Durham is a half-hour drive to the northeast.

Durham is home to Duke University, while Raleigh is home to North Carolina State University. The third city in the Research Triangle, Chapel Hill, is home to the University of North Carolina at Chapel Hill.

These schools bring thousands of students into the area, contributing to nearly 50% of the cities' housing units being renter-occupied.

In addition, the permanent population of Raleigh/Durham has increased by 2.3% yearly, while employment has grown by nearly 2.6% over the same period.

Median rents for multifamily properties in Raleigh and Durham are over $1,500 monthly, with Durham properties slightly lower prices. Nearly 50% of the housing units in each city are renter-occupied. Chapel Hill's median rents are considerably higher, priced at over $1,900 monthly for similar units.

North Carolina's neighbor to the west, Tennessee, is home to another top pick.

Nashville, Tennessee, is another attractive choice for multifamily investors. One of the fastest-growing cities in the nation, it attracts newcomers with its legendary appeal as a career-launching destination for country music entertainers.

Renters currently occupy more than 40% of Nashville's housing units. Annual rent prices reflect the city's popularity, increasing by around 9% during 2022. Two-bedroom units are leased at a monthly median rent of around $1,840.

Vanderbilt University is another draw for potential renters. With a current student enrollment of over 13,000, the university is known for its high level of research activities. The Freedom Forum First Amendment Center, Robert Penn Warren Center for the Humanities, and Dyer Observatory are all affiliated with Vanderbilt.

Industries headquartered in or near Nashville include Dollar General Corporation, Mitsubishi Motors, Community Health Systems, HCA Healthcare Inc., and Bridgestone Americas Inc. One of Amazon's Operation Centers of Excellence is located in Nashville.

Just 180 miles east of Nashville, Knoxville is popular with multifamily investors. Rent prices in this city rose 17% between 2021 and 2022, and the local job market continues to drive workers to the area.

In addition, Knoxville is home to the flagship University of Tennessee campus that draws over 33,000 students each year.

Investors hoping for opportunities on the West Coast may be pleasantly surprised by our next pick.

San Jose, California, is the most expensive city we chose, with a median rent of $2,300-$2,400. Rental prices have risen by almost 5% over the past 12 months, outpacing state (2.3%) and national (3.3%) averages. Rents are expected to increase by another 4.9% during 2023.

While some tech names have fled California, plenty remains, including Samsung, Qualcomm, Netgear, and Cisco. Apple continues to expand within the area.

Like other top picks for multifamily investors, several top universities are nearby. Thousands of students, many with plans to work for Silicon Valley companies, attend the University of California's Berkley and Santa Cruz campuses, Stanford University, and California State University.

The combination of a large, well-funded student population, plus working professionals, adds up to lucrative opportunities for owners of San Jose multifamily real estate. Few San Jose residential properties are affordable to locals, as a buyer must earn over $330,000 per annum to afford a single-family home.

Our last recommendations are within the same state. Investors who like this area will have twice the selection of multifamily properties.

Orlando and Tampa, Florida, offer newcomers an ideal combination of a relatively low cost of living, plenty of job opportunities, and a pleasant climate. Plenty of retirees head to Florida as well.

The state is a favorite holiday destination, home to several world-famous theme parks and resorts. Tourism-related job growth in both cities is rising steadily due to the number of consumers headed to Florida to make up for vacations postponed because of COVID.

In addition to tourism, Orlando's job market is growing due to local healthcare, technology, and aerospace/defense industries. Tampa's economy also offers plenty of employment opportunities, ranging from education to finance.

During 2022 alone, Tampa's population grew by over 180,000, and multifamily rent increases in the area were among some of the highest in Q3 and Q4 2022.

While rising interest rates in 2023 are expected to keep residential home sales lower than in previous years, this will also increase the need for multifamily rental properties across the nation.