Suburban Investment Property: Pros and Cons

By: Max Sharkansky, Managing Partner
Menlo square exterior

At first glance, some investors may turn away from investing in suburban multifamily properties due to feeling that it is possibly too late to join the investment boom. However, purchasing an investment property in the suburbs has its advantages. According to CBRE research, “suburban multifamily will outperform urban, maintaining lower vacancy and achieving higher rent growth.” Ultimately, buying or building in the suburbs will remain the best in market performance and investment returns.

Although there are pros to buying suburban properties, there are also disadvantages. Let’s take a closer look at investments in suburban properties.  

Pros of Investing in Suburban Property

 

1. Cost-efficient

 

Living in a house in the suburbs saves money in the long run by having a lower price per square footage than in the city for the renter. Additionally, depending on what type of investor you are, providing value-added opportunities in a suburban property may offer higher returns.

These opportunities may include renovating units, shared common areas, building garage parking, etc. According to the CBRE Research, “New rent regulations have been instituted in a few key markets, and many more are being considered to alleviate rising rental housing costs. Housing economists concur that building more housing is a better response to the problem than rental control…” Investors can meet the needs and demands of new suburban renters with lower income while increasing their profits.  

Related: Short-Term Rental and the Effects on Housing Affordability  

2. Spacious

Menlo Square suburban investment property 

 

During a time of living in a pandemic, where social-distancing is necessary, the appeal of having more outdoor space is a huge benefit. This will continue to be a benefit long after the current crisis has passed.  The advantages of investing in such attractive properties will leave you with no concerns about their occupancy later.  Homes in the suburbs offer a nice getaway from the hectic city life allowing residents to decompress and relax.  

3. Low crime rates

 

According to the National Crime Victimization Survey (NCVS) Subnational program and data collected by the FBI’s Uniform Crime Reporting (UCR) program, “urban areas generally have higher crime rates than rural or suburban properties there are exceptions. Demographics, geography, and culture are related to the incidence, prevalence, and types of victimization.” Therefore, more populated cities typically have higher crime rates making suburban living more reliable and safe.  

4. Attracting Long-term Renters

 

Living Room of Huntley Apartments

 

Most renters seeking a suburban lifestyle hope to live on the property for the long run. Long-term renters are more likely to commit beyond a one-year lease agreement to obtain the benefits of having a more private living suburban home. This commitment will gain you high-quality renters who abide by agreements and keep properties in good condition.  

Related: Best Way to Value Property for the Best Return  

5. City Accessibility

 

Living in a suburban community provides your renters with the choice to be as close to or as far from the nearest city. Usually, with easy access via public transit or by car, city accessibility offers connections to downtown, quality schools, restaurants, retail, entertainment, and other amenities, increasing high demand for many tenants.  

Cons of Suburban Investment Property

 

1. A Smaller Renter Pool

Living in the suburbs usually implies that many residents are themselves already homeowners, so they are not seeking rental units. Be aware that re-occupying vacant units could be a challenge if your focus is on people in the local area. Additionally, if you hope to gain a more significant profit from charging high rents, you may find that suburban renters are looking for more affordable rents.  

Related: California and Oregon Rent Control   

2. Less Social Diversity

Huntley Apartments, Beaverton OR

Even though there is much appeal of the quiet and calm properties in the suburbs, they, unfortunately, lack social diversity. If potential renters are looking for a more diverse living environment, they may not find your suburban property attractive.  

3. Poorer Access to Public Transit

 

Dwellings in the suburbs are typically within a 1-hour traveling range of the nearest city. For many people who own a car, this may not seem like a limitation. However, those who do not own a car or who enjoy walking to popular locations may not find the suburbs very exciting. The isolation limits access to trendy goods and services. Additionally, if a suburban investment property is located too far from main highways or cities, renters may find this unappealing, ultimately limiting your potential renter pool.  

Related: Do Transit-Oriented Properties Make the Smartest Investments?   

4. Competing Suburban Multifamily Property

 

Depending on the location, investors may seek more suburban multifamily properties that are not along the coast, such as New York City. These are less affordable and offer lower cap rates than the city. There is an increase of renters from the coastal shores seeking multifamily properties in other areas of the country, such as Texas and Arizona.  

Related: What is a Good Cap Rate for Multifamily Homes in California?   

Conclusion

Co-investing in suburban real estate can have its advantages and disadvantages. However, you do not have to navigate these challenges on your own. Trion Properties offer many resources and investments for you to maximize returns. The managing principals have a combined investment experience of over 20 years in West Coast real estate markets and have conducted in excess of $1 billion in transactions.  

Are you interested in learning more about co-investing with the experts in multifamily properties? Contact us at Trion Properties