As real estate investors search for higher returns and lower competition, many are turning to tertiary markets. These smaller, less saturated areas offer strong cash flow potential and the opportunity to diversify across untapped regions. At Viking Capital, we focus on helping investors identify these opportunities early and invest strategically for long-term success.
Tertiary multifamily markets often offer higher yields and strong rental demand, with lower entry costs in areas supported by job and population growth. While these markets carry unique risks, investors who apply proper due diligence and work with experienced operators can unlock significant value.
This article outlines why tertiary markets matter, how they differ from primary and secondary markets, and how investors can benefit from passive investing in these emerging areas.
What Is a Tertiary Market and Why Are Tertiary Markets Important for Multifamily Investors?
A tertiary market is typically a smaller city with a population of less than 1 million. These markets often have limited transaction volume and receive less institutional attention. Unlike primary markets like New York or Los Angeles, or secondary cities like Denver or Charlotte, tertiary markets often operate outside the spotlight.
Investors pursue tertiary market investments for several reasons:
- They seek higher yields with less competition.
- They want to diversify geographically.
- They target areas where demographic shifts and economic trends indicate long-term growth potential.
Multifamily investors find these markets attractive because they often combine population growth, rental demand, and affordable property values. These factors create favorable conditions for value-add investing, stable cash flow, and long-term appreciation.
Examples of Tertiary Markets
Several tertiary markets across the U.S. show strong fundamentals and growing investor interest. Notable examples include:
- Nashville, Tennessee
- Phoenix, Arizona
- Atlanta, Georgia
- San Antonio, Texas
- Southbend, Indiana
These cities share common features: growing populations, strong employment bases, and limited multifamily housing supply. In many cases, rental demand is outpacing new development, creating opportunities for investors to step in and meet local needs.
Limited construction activity, driven by zoning restrictions, high material costs, and cautious local builders, has left a noticeable supply gap in many growing tertiary cities. As more residents move in for affordability, job opportunities, and lifestyle factors, the existing housing stock cannot keep pace. This imbalance increases rent growth and reduces vacancy rates, which creates strong conditions for both stabilized and value-add multifamily investments. Investors who act early can meet market demand while securing steady cash flow and long-term appreciation.
Key Trends Shaping Tertiary Market Investments in 2025
Several macroeconomic and demographic shifts are increasing interest in tertiary markets. Investors who stay ahead of these trends can position themselves to benefit from both income and appreciation.
1. Remote Work Drives Migration
Remote and hybrid work models allow employees to relocate to smaller cities. As a result, housing demand is increasing in affordable markets with strong quality-of-life metrics.
2. Population Growth in Affordable States
Tertiary cities in states like Arizona, Texas, and Tennessee are attracting new residents due to lower taxes and living costs. These population shifts support long-term rental demand.
3. Institutional Investors Explore Smaller Markets
As cap rates compress in primary and secondary markets, institutions have started to evaluate deals in emerging cities. This shift can create both competition and validation in tertiary markets.
4. Undersupplied Housing
Many tertiary markets have seen little new development over the past decade. Investors who acquire or reposition existing assets can benefit from favorable supply-demand dynamics.
Why Invest in Tertiary Markets: Key Benefits and Risks
Investing in tertiary markets can deliver strong performance, especially when paired with the right strategy. However, investors must also understand the potential risks.
Key Benefits
- Higher cash-on-cash returns due to less pricing pressure
- Lower acquisition costs that support better yield profiles
- Market inefficiencies that create opportunities for skilled operators
- Less institutional competition, which can improve deal flow
Key Risks
- Lower liquidity and fewer buyers during an exit
- Limited data and comps, which can complicate underwriting
- Higher economic dependence on single industries or employers
- Slower appreciation in some markets without sustained growth
Investors should always balance risk with return and work with experienced teams that know how to navigate local market dynamics.
Who Should Consider Tertiary Multifamily Investing?
Tertiary market investing suits a specific type of investor. It works best for those who want higher income, value long-term growth, and understand the importance of diversification.
Consider this strategy if you are:
- An accredited investor seeking stronger yield than core markets can offer
- A passive investor looking to reduce exposure to volatile equities
- A high net-worth professional building long-term financial security
- A tax-conscious investor who wants to leverage depreciation and estate strategies
Multifamily syndications in these markets can provide monthly cash flow, tax advantages, and long-term appreciation, all without the responsibilities of active property management. Investors gain access to professionally managed assets, benefit from economies of scale, and participate in growth markets without dealing with tenant issues, maintenance coordination, or day-to-day decision-making. This structure enables investors to focus on their careers or other priorities while their capital generates returns in well-positioned real estate assets.
Is Passive Investing in Tertiary Markets a Viable Strategy?
Yes. Passive investing in tertiary multifamily markets can work well if you partner with experienced operators who understand local conditions and structure deals conservatively.
Successful passive investors typically focus on stabilized or value-add multifamily properties that show strong underlying fundamentals. They prioritize deals that use fixed-rate debt and maintain conservative leverage to help manage risk.
Evaluating the sponsor’s track record, especially their experience in similar markets, is essential for assessing the quality of the opportunity. Additionally, investors should consider broader market indicators, such as population growth, job creation, and housing supply, to ensure the location supports long-term demand.
How to Conduct Due Diligence in Tertiary Markets
Effective due diligence separates strong deals from risky ones. Since tertiary markets have less publicly available data, investors must conduct more thorough research and rely on experienced teams.
Use the following due diligence checklist to vet tertiary market potential:
- Confirm population and job growth through census and economic data
- Evaluate housing supply and pipeline reports
- Understand the dominant industries and employer base
- Visit the market or speak with local property managers and brokers
- Analyze comparable rents and occupancy rates
When investors understand local dynamics, they can uncover high-performing assets that larger investors often overlook.
What the Future Holds for Tertiary Multifamily Investing
Tertiary markets have moved from an alternative strategy to a core focus for many investors. As affordability concerns, demographic shifts, and interest in passive income increase, these smaller markets offer compelling value.
Over the next decade, expect continued migration from large urban centers into smaller, more affordable cities. This trend is likely to strengthen demand for rental housing in tertiary markets, particularly as younger families, remote workers, and retirees seek more affordable options. As these cities grow, institutional capital is beginning to take notice. Once overlooked by large investment firms, tertiary markets are now attracting increased attention due to their strong fundamentals and income potential.
This rising interest is also increasing demand for workforce housing and value-add opportunities. Investors who can identify underperforming or underutilized assets and improve them through renovations or operational efficiencies stand to benefit from both appreciation and improved cash flow. At the same time, more real estate syndicators are focusing on these markets, offering curated investment opportunities that provide access to professionally managed properties with attractive return profiles.
Investors who recognize these trends and align their portfolios accordingly can position themselves to benefit from consistent income, long-term growth, and enhanced portfolio resilience in a changing economic environment.
Take Action: Invest in the Right Market with the Right Partner
At Viking Capital, we help investors identify and participate in carefully selected tertiary market investments that deliver consistent returns. Whether you want to diversify, build passive income, or preserve wealth through multifamily syndications, we provide the access and expertise to help you succeed.
Here’s how to get started:
👉 Browse Our Current Investment Offerings
👉 Schedule a 15-Minute Strategy Call
👉 Read Our Beginner-Friendly Multifamily Guide
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