When most people think about multifamily real estate investing, their minds go straight to Chicago, Minneapolis, or other large metros. But there’s a world of opportunity outside the spotlight — in smaller, often-overlooked tertiary and rural markets across the Midwest.
These towns and counties don’t get the same press, but they have steady demand, limited competition, and properties that can deliver impressive returns. At Ellsbury Commercial Group, we’ve seen first-hand how investors are winning big in these markets, buying well-positioned multifamily properties at a discount and unlocking tremendous value.
Affordable Entry Point with More Breathing Room
One of the biggest draws of tertiary markets is simply the cost of entry. Compared to major cities where prices are driven up by competition from institutional players, properties in smaller markets are much more approachable.
Instead of fighting over razor-thin cap rates, investors can buy in at higher yields, often with better cash-on-cash returns from day one. This creates a safer cushion for those building portfolios or testing new markets. Lower acquisition costs also mean more flexibility when it comes to renovations, financing structures, or value-add strategies.
Source: CoStar
Demand for Housing Is Real — and Growing
It’s a common misconception that smaller markets lack renter demand. In reality, many tertiary and rural areas are experiencing a serious housing shortage. Workers in manufacturing, healthcare, logistics, and education often need quality housing close to jobs — and in many cases, the existing rental stock is outdated or under-supplied.
National housing studies confirm this trend. Reports show rural America has some of the highest levels of housing underproduction in the country, with the Midwest standing out as particularly underserved. This means that when investors provide clean, updated units at fair rents, they often find a steady pool of tenants ready to move in.
Sources: Up for Growth (2023), Chicago Fed (2025)
Less Competition Means More Opportunity
Another advantage? Less competition from big money. Institutional investors and REITs typically avoid tertiary markets, sticking to large metros and established secondary cities. That leaves plenty of room for private buyers and entrepreneurial sponsors to move quickly on deals.
In practical terms, this means more negotiating power, less pressure to overpay, and the chance to build scale before larger groups start moving into these markets. It’s not unusual for an investor in a tertiary town to secure deals that would’ve been impossible in a city — simply because there’s less capital chasing them.
Source: Pioneer Realty Capital
Unlocking Value in Undermarket Rents
Walk through many of these properties and you’ll see the opportunity immediately: rents are often far below market. Long-time owners may not have updated units, pushed rental rates, or used modern leasing practices.
For an investor, that’s a chance to step in, renovate kitchens and baths, improve curb appeal, or even just professionalize the management. The result is higher rents that still feel affordable to tenants compared to larger nearby cities — and a healthier bottom line for the owner.
Source: CoStar
Cash Flow That Stacks Up
One of the strongest arguments for tertiary multifamily is the cash flow. With lower acquisition prices and higher cap rates, investors often enjoy better margins than they would in larger metros.
Smaller markets also tend to avoid the boom-and-bust cycles of big cities. With limited new construction, vacancy rates can remain stable even during downturns.
For investors looking for reliable income streams, that combination of yield and stability is hard to beat.
Source: CoStar
The Power of Local Relationships
In tertiary markets, local connections matter more than in any metro. Landlords who build strong ties with contractors, city officials, and residents often see outsized returns. Whether it’s securing better rates for repairs, getting local tax incentives, or improving tenant retention, operational savvy can move the needle significantly.
It’s also an environment where reputation counts. A landlord who invests in the community and treats tenants fairly often gains loyalty, word-of-mouth referrals, and fewer headaches overall.
Success Stories from Ellsbury Commercial Group
At Ellsbury Commercial Group, we’ve seen these principles in action. Several of our clients have purchased multifamily properties in tertiary Midwest towns at attractive prices, then unlocked value through modest renovations, management improvements, and rent adjustments.
These deals delivered strong cash flow and long-term appreciation — while also addressing a real community need for better housing. For us, that’s the sweet spot: investments that make financial sense and have a positive local impact.
Know the Risks, Play Them Smart
No investment is without risk. Tertiary markets can have thinner buyer pools when it’s time to sell, and local economies may depend on just a few industries. That’s why it’s critical to underwrite conservatively, verify economic drivers, and make sure the demand story is real.
But with careful due diligence, the rewards can far outweigh the risks.
Conclusion
Multifamily properties in tertiary Midwest markets may not make headlines, but they make sense. They offer:
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Lower barriers to entry
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Strong tenant demand
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Limited competition
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Undermarket rent upside
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Attractive cash flow and stability
At Ellsbury Commercial Group, we believe these markets will continue to be one of the most overlooked yet profitable opportunities in real estate investing.
👉 Interested in learning more? Contact Ellsbury Group today to hear about current deals and upcoming opportunities.
