Navigating the Multifamily Boom in North Carolina: Cap Rates, Returns, and Opportunities for Investors in 2025-2028

Navigating the Multifamily Boom in North Carolina: Cap Rates, Returns, and Opportunities for Investors in 2025-2028

By Tom Marchesello, Founder & President of Magnet Asset Management

March 24, 2025

North Carolina’s commercial real estate (CRE) market is buzzing with opportunity, particularly in the multifamily homes and condo sector. As a U.S. Military Veteran and the Founder & President of Magnet, a Charlotte-based company dedicated to driving value in real estate investments, I’ve seen firsthand how the Tar Heel State has become a magnet for growth. With a surging population, robust job market, and an influx of new residents, the demand for multifamily housing—apartments, townhomes, and condos—continues to climb. For investors eyeing a move into this space in 2025 with an exit strategy by 2028, the numbers tell an encouraging story. Let’s break down the market dynamics, cap rates, and expected returns to help you make an informed decision.

The Multifamily Surge in North Carolina

North Carolina’s appeal is no secret. Between July 2023 and July 2024, the state added over 165,000 new residents, ranking it among the top states for population growth in the U.S. Cities like Charlotte, Raleigh, and Durham are at the forefront, fueled by strong employment in sectors like finance, tech, and healthcare. This growth has put pressure on housing supply, particularly for multifamily units, as homeownership remains out of reach for many due to elevated interest rates and single-family home prices.

In Charlotte, where Magnet is headquartered, we’re seeing a steady rise in multifamily construction to meet this demand. Statewide, over 25,000 residential building permits were issued in Q2 2024 alone, with multifamily units accounting for more than 27% of that total. Condo and townhome inventory in Raleigh, for example, jumped nearly 39% year-over-year in October 2024, signaling builders’ confidence in the market. Yet, despite this uptick in supply, demand remains robust, driven by younger generations renting longer and an influx of out-of-state buyers seeking affordable urban living.

Cap Rates: Where We Stand and Where We’re Headed

For investors, capitalization rates (cap rates) are a critical metric in evaluating multifamily properties. In 2025, we expect cap rates for multifamily homes and condos in North Carolina to hover between 5.5% and 6.5%, depending on location and asset quality. In high-demand markets like Charlotte and Raleigh-Durham, Class A properties—newer, amenity-rich developments—may see cap rates closer to 5.5%, reflecting their premium pricing and lower perceived risk. Class B and C properties, often older or in less central locations, could trend toward the higher end at 6.5%, offering more value-add potential.

Looking ahead to 2028, cap rates are likely to compress slightly as the market stabilizes and interest rates moderate. The Federal Reserve’s planned rate cuts—two in late 2024 and four more in 2025—should ease borrowing costs, boosting property values and nudging cap rates down to a range of 5.0% to 6.0%. At Magnet, we’re advising our clients to lock in deals now, as this compression could enhance returns for those who buy in 2025 and sell in 2028.

Expected Returns: The 2025-2028 Horizon

So, what can investors expect if they enter the North Carolina multifamily market in 2025 and exit in 2028? Let’s crunch the numbers. Assuming a conservative annual net operating income (NOI) growth of 2-3%—driven by steady rent increases and high occupancy rates—and a purchase cap rate of 6% in 2025, a well-positioned multifamily property could deliver an unlevered internal rate of return (IRR) of 7-9% over the three-year hold period. Factor in leverage at a 65% loan-to-value ratio with interest rates stabilizing around 5.5% by 2025, and levered IRR could climb to 10-12%, assuming a sale at a 5.5% exit cap rate in 2028.

These returns are compelling, especially in a market like North Carolina, where population and job growth provide a strong tailwind. For example, a $10 million multifamily acquisition in Charlotte today could see its value rise to $11.5-$12 million by 2028, factoring in NOI growth and cap rate compression. At Magnet, we’ve seen similar plays succeed for our clients, and our veteran-led team is laser-focused on identifying properties with this kind of upside.

Why North Carolina? Why Now?

The multifamily and condo market in North Carolina isn’t just about numbers—it’s about momentum. The state’s economic fundamentals, from job creation to infrastructure investments like Raleigh’s planned commuter rail, signal sustained demand through 2028. Yet, challenges like overbuilding in some submarkets (think Raleigh-Durham’s Class A glut) mean investors need a strategic partner to navigate the landscape. That’s where Magnet comes in. Based in Charlotte, we bring a disciplined, boots-on-the-ground approach to CRE, honed by my military experience and years in the industry.

For investors looking to capitalize on this window, 2025 is the time to act. By 2028, those who move decisively could see healthy returns while riding the wave of North Carolina’s multifamily boom. At Magnet, we’re here to guide you every step of the way—because in real estate, as in life, timing and execution are everything.

About the Author:

Tom Marchesello is the Founder & President of Magnet, a U.S. Military Veteran-owned commercial real estate company based in Charlotte, NC. With a commitment to precision and value, Magnet helps investors unlock opportunities in the dynamic CRE market. Learn more at www.magnetam.com.