Jay Madary takes to the pages of National Real Estate Investor to make the case for the Midwest, where many markets still offer high cap rates and slow but steady performance.

Madary, an owner–operator out of Oak Brook, Ill., argues that while the 24/7 coastal metros get much attention, one of the greatest opportunities right now is in secondary and tertiary metros such as Cleveland; Kansas City, Mo.; and Indianapolis.

Indeed, with the higher cap rates and steady rent growth found in the region, the Midwest offers higher returns in asset values than the nation's primary markets, especially as the sector approaches affordability ceilings in places like New York and San Francisco.

Whereas cap rates for luxury apartment communities in New York City or San Francisco average from mid-3% to mid-4%, Class A multifamily in the Midwest usually sells at cap rates at least 100 basis points higher, making for a much more accessible market.

Considering that Midwest owner/operators and their investors also have access to the same historically low financing available to the major players on the coasts, the stage is immediately set for higher yields and immediate cash flow.

Meanwhile, rent growth in Midwest markets continues at its nice, steady annual pace, traditionally in the 3.0 percent to 5.0 percent range. And the region appears poised to have ample runway for continued growth.

... In short, it may not have a lot of sizzle, yet it's got plenty of steak.

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