🏗️ The Rise of Undersupplied Markets: Why We’re Bullish on the Midwest & Beyond
Unlocking Opportunities: Why Undersupplied Markets Are the Key to Strong Multifamily Returns
Dear Friends,
In today's high-interest, cautious lending environment, the hottest multifamily opportunities are not where you'd traditionally think. Forget the oversaturated Sunbelt cities like Austin and Phoenix — smart capital is migrating to places often overlooked: undersupplied markets. These are metros where housing demand far outpaces current inventory—and that gap is driving real, sustainable rent growth.
At Level 7 Investors, we believe the next decade will be defined by strategic moves into these markets, we are focused on resilient, data-backed markets where strong fundamentals support our target returns of the minimum below:
✅ 2x equity multiple over 10 years
✅ 5%+ average annual cash-on-cash return
Today, let’s break down the hottest undersupplied markets of 2025—and why the future looks especially bright for areas like Indianapolis, Kansas City, Columbus, Charleston, and Louisville.
📊 Strengths of Undersupplied Markets
High Rent Growth Potential: Demand exceeds supply, pushing rents upward.
Strong Job Growth: Many of these markets are hubs for manufacturing, logistics, healthcare, and education.
Lower Construction Volume = less supply shock
Stable Cash Flow: Limited new construction leads to steady occupancy and rent increases.
More Favorable Pricing: Lower entry prices than coastal or Sunbelt cities.
Affordable Rent vs Income: these markets target rents below 33% of Income
Higher Predictability: Less subject to boom-bust cycles compared to trendy markets.
📉 Weaknesses to Watch
Slower Liquidity: Exit strategies may take longer compared to high-demand metros.
Limited Institutional Attention: These markets may lack "headline" buzz, impacting large capital inflows.
Infrastructure Needs: Some secondary and tertiary markets need infrastructure upgrades.
🔥 Top 5 Undersupplied Markets Today
📌 Note: These cities show the strongest rent resilience and limited new supply due to zoning or developer pullback. Ideal conditions for long-term value-add or core-plus investments.
🏘️ How These Markets Fit Level 7’s Model
Example: Columbus, OH
Cap Rates: 5.25% for Class B/C
Rent Growth: 4.1% YoY
New Supply: Down 32% YoY
Expected 10-Year Returns:
CoC: 5.8% average
Equity Multiple: 2.2x
All five top markets meet or exceed our criteria, especially when underwriting with conservative assumptions on rent growth and stabilized expenses.
These markets exhibit the fundamental strengths we seek - affordability, job growth, and constrained new supply - all ingredients for predictable cash flow and appreciation.
📊 Level 7 Investors Criteria: 2x Equity Multiple and 5%+ Cash-on-Cash Returns
Our underwriting is laser-focused:
Equity Multiple: Our minimum target is to double our investors' equity over a 10-year hold.
Cash-on-Cash Return: We target at least a 5% average cash return across the hold period.
Each of these undersupplied markets meets or exceeds these thresholds, largely because:
Rents are rising faster than inflation.
Job creation is steady, not spiky.
New construction remains moderate due to higher interest rates and construction costs.
🔭 Markets We’re Targeting: On-the-Ground Alignment
We’re currently vetting opportunities in the following regions—each one echoing the same trends of supply shortage, demand resilience, and investor upside.
📈 Why Level 7 likes these Markets
Indianapolis Suburbs (Carmel, Greenwood, Fishers)
This is our favorite market to invest in 2025. The market is solid and growing areas like Carmel and Fishers outside of Indianapolis meet and exceed our criteria. The have the following which we like very much:
Explosive Population Growth
Excellent job diversity (tech, logistics, healthcare)
Strong rent growth projections
High Median Household income over 100K in areas like Carmel and Fishers
Low Vacancy Rates
Low Crime Rates
Strong Rent Growth in the next 5 to 10 years
Kansas City, MO (Suburbs and Core)
Suburban areas population booming think (Lee’s Summit, Blue Springs, Liberty, Belton, Grain Valley) all are growing faster than the urban core.
High Affordability
5-year rent growth: ~28%, with forecasted rents to be 19-22% growth
Limited Supply resulting in strong occupancy rates and increase rents going forward.
Major Employers are expanding beyond the city core increase jobs = renters
Charleston, SC (Outer Suburbs)
Significant population increase with approximately 34 new residents daily
Increase housing demands in areas like (North Charleston, Summersville, Goose Creek, and Mount Pleasant)
Despite a 14.8% increase in multifamily inventory over the past 3 years, occupancy rates are rising as demand outpaces new construction.
2-billion-dollar investment by Google in two new data center campuses
North Charleston is leading in housing growth with a 65% increase over 18 years
Summersville attracts renters seeking suburban living with access to Charleston’s amenities
Goose Creek - offers affordable housing and proximity to major employment centers
Mount Pleasant is known for higher-end developments and strong rental demand.
Columbus, OH (Suburbs)
Explosive Job growth:
Intel 28 billion chip manufacturing campus (one of the largest economic development projects in US history)
Jobs created 20,000+ directly and indirectly
Growing Sectors like Tech and Healthcare
Headquarters of major employers, strong university presence with Ohio State
Population Growth is booming
Grew 14% over the last 10 years one of the fastest rates in the Midwest
Areas outside the city are experiencing strong suburban migration
Major Undersupply of Housing
Needs 50,000+ new housing units by 203 to meet expected demand
Vacancy Rates are under 5% even as new buildings come online
Affordability Advantage
Very Affordable to renters: Median 2 bedroom is ~$1,325
Rent to Income is healthy meaning room for future rent increases without pricing tenants out
Louisville, KY (Suburbs and Core)
Steady Population Growth
Growing at about 1% per year
New housing supply has not kept up with demand
Many suburban areas like Jeffersontown, Shepherdsville, Elizabethtown, Mount Washington, and Crestwood are growing even faster (1.5% + annually)
Job Expansion
UPS Worldport - employing over 25,000+ people
Strong Healthcare Sector: Norton Healthcare, U of L Helath, Kinder Healthcare are all major employers
Manufacturing Strength (Ford, GE Appliances) and tech/biotech growth are diversifying the economy
High Demand for middle- and working-class housing
Affordability (Renters and Absorb Rent increases)
Median 2BR is metro Louisville is ~$1170
Rent to Income ratios are healthy (~26-28%) versus national average (~30)
This gives room for continued growth without affordability crisis
Limited New Construction
Does not have the massive overbuilding issues of cities like Nashville, Austin, or Phoenix
New Supply is measured and controlled
Why This Matters:
As we move deeper into 2025, the Federal Reserve's cautious stance on rates, combined with demographic shifts and constrained supply, is setting up a "golden era" for landlords in these markets.
Investors who move now — into stable, undersupplied markets — will likely enjoy outsized returns compared to those chasing "hot" but saturated metros.
If you're serious about achieving a minimum of 2x multiple and 5%+ cash-on-cash returns over the next 10 years, these are the markets you want to be watching.
💡 Final Thought: Undersupplied = Undervalued
We believe 2025 is the year when investors will shift from hype-driven metros to fundamentally sound cities. That’s where you find your edge—not just in appreciation, but in dependable cash flow.
The best part? These markets are still under the radar. But not for long.
📬 Want early access to our next multifamily acquisition in one of these markets?
Schedule a quick 15-minute call and let’s connect → Book a Call
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To your success,
Manny Del Val
Founder and CFO | Level 7 Investors
📍 Investing with integrity. Building generational wealth.
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