Market Selection: Outlining the Unique Risks of Urban, Suburban, and Rural Multifamily Investing

When it comes to multifamily investing, location doesn’t just drive returns — it shapes your entire risk profile. The market you choose shapes everything from tenant demand and cash flow stability to operational challenges and exit strategies. Whether you’re drawn to the high-energy pulse of Urban centers, the balanced lifestyle of Suburban communities, or the low entry prices in Rural areas, each comes with its own set of opportunities and pitfalls. Today, I’m diving deep into the key risks investors face when buying multifamily properties in Urban, Suburban, and Rural markets.

Urban Areas

• Supply Risk: High-demand urban markets typically attract significant development activity, especially for new apartment buildings. Market oversaturation can lead to rental concessions and stagnant rent growth.

• Regulatory Risk: Large urban centers have a higher tendency to implement rent control measures and increase regulatory requirements compared to smaller markets. The regulatory environment can change from year to year.

• Crime and Perception: Urban areas generally face higher crime concerns than suburban and rural locations. Shifting crime trends can lower renter demand or require increased security spending.

• Property Tax Creep: Local governments may hike taxes to fund aging schools or infrastructure, eating into profit margins.

Suburban Areas

• Economic Dependence: Suburban locations have a smaller job market than urban locations. Layoffs at a major employer can reduce tenant demand as people relocate or cut housing budgets.

• Development Oversupply: Suburban growth can attract developers, leading to an oversaturation of units. Unlike urban areas, suburban markets often have ample farmland to be redeveloped. This leads to a lower barrier of entry for developers. Newer properties with better amenities might pull tenants away from older buildings.

• Transportation Risk: The typical lack of robust public transit options makes suburban residents car-dependent. Major roadway construction projects can create significant tenant inconvenience, while increasing fuel costs or worsening traffic congestion may diminish an area's attractiveness.

• Demographic Shifts: Aging populations or an exodus of young professionals to urban cores can shrink the renter pool, especially if the suburb lacks lifestyle appeal.

Rural Areas

• Economic Fragility: Rural economies tied to agriculture, manufacturing, or seasonal tourism can collapse with commodity price drops or factory closures, leaving tenants unable to pay.

• Maintenance Challenges: Distance from suppliers and contractors can inflate repair costs and delay fixes, especially for older properties common in rural areas.

• Liquidity Risk: Selling a multifamily property in a rural market can take years due to a smaller buyer pool, locking up capital.

• Amenity Scarcity: Lack of schools, healthcare, or entertainment can make it hard to attract or retain tenants, especially families.

• Infrastructure Gaps: Poor internet, road access, or utility reliability can deter renters and increase maintenance costs for landlords.

Each location’s risks are comprised of a blend of tenant demand, economic stability, and operational costs. Urban offers high reward but high exposure to supply risk; Rural offers cashflow but struggles with economic fragility. Suburban sits in between, blending some of each extreme. Picking the right location depends on your tolerance for volatility and how much you’re willing to bet on long-term trends.

-Ben Michel

Ben Michel is the founder of Ridgeview Property Group, an investment firm specializing in multifamily real estate. Register Here to be notified of available investment opportunities.