For decades, institutional investors dominated primary markets like Los Angeles, San Francisco, and Seattle because of their stability, density, and prestige. But over the last ten years, a powerful shift has taken place—one that has completely reshaped where smart capital flows.
Accredited investors seeking higher cash flow, better entry pricing, stronger population growth, and less compressed cap rates are increasingly turning toward Western U.S. secondary markets. These are cities that aren’t quite Tier 1 metros but outperform in nearly every key fundamental that matters for multifamily.
At Amethys Projects, our acquisition strategy is built around this shift. We focus on high-growth secondary markets where demand significantly outpaces supply, competition is limited, and value-add improvements can dramatically enhance equity and yield.
In this deep dive, we’ll explore why these markets are gaining attention, the advantages they offer, and how accredited investors can leverage them for wealth creation.
What Exactly Are “Secondary Markets”?
A secondary market is a metropolitan area with strong economic fundamentals but smaller population density than major Tier 1 markets. They are typically characterized by: high job and population growth, lower cost of living, pro-business environments, strong migration inflows, less institutional saturation, and stable or rising rental demand.
Examples in the Western U.S. include: Phoenix, AZ / Salt Lake City, UT / Boise, ID / Reno, NV / Colorado Springs, CO / Tucson, AZ / Spokane, WA
Though smaller than primary markets, these cities consistently outperform in exactly the categories investors care about.
Why Capital Is Moving Out of Primary Markets
Primary markets are expensive, competitive, and tightly regulated. They offer prestige—but not always performance.
(a) Compressed Cap Rates. In cities like San Francisco or Seattle, cap rates sit so low that cash flow becomes extremely difficult without over-leveraging. Properties trade at huge premiums.
(b) High Regulatory Friction. Rent control, permitting delays, zoning restrictions, and tenant-friendly legislation all reduce investor flexibility.
(c) Slowing Population Growth. Many coastal markets are experiencing net out-migration due to cost of living and remote work trends.
(d) Institutional Crowding. Large funds compete aggressively for core assets, driving prices even higher.
The result? Lower entry cap rates, lower yields, and compressed returns for passive investors.
Why Western Secondary Markets Are Winning
Here’s where the story gets interesting.
Markets like Phoenix and Boise have become magnets for working professionals, tech talent, retirees, and remote workers.
(a) Massive Population Migration. According to recent population reports, the Western Sunbelt continues to attract residents at rates far above the national average. People are chasing: lower taxes, better affordability, improved quality of life, more space, growing job opportunities. This migration boosts rental demand and occupancy rates.
(b) Strong Employment Growth. These markets are no longer “small." They are rising hubs for: biotech, software, e-commerce, manufacturing, education, healthcare. Job growth equals renter demand—especially in the workforce housing and value-add segments.
(c) Better Investment Entry Points. Compared to coastal markets: cap rates are healthier, price-per-door is significantly lower, competition from large institutional funds is lighter, value-add opportunities are more abundant. This allows investors to earn higher yields without sacrificing quality.
(d) Business-friendly Regulatory Environments. Cities like Phoenix, Salt Lake City, and Reno have: faster permitting, lower taxes, landlord-friendly regulations, minimal rent control barriers. This means operators can actually implement renovations and reposition properties efficiently—key to executing a successful value-add strategy.
Why Secondary Markets Offer Stronger Cash Flow
While primary markets often rely on appreciation, secondary markets can deliver both cash flow and appreciation.
Here’s why:
Higher Cap Rates. Cash-on-cash returns and annual distributions tend to be higher when cap rates are healthy.
Lower Operating Costs. Labor, taxes, insurance, and maintenance costs are often more manageable outside coastal metros.
Value-Add Demand. Workforce housing, renovated interiors, and amenity upgrades are in high demand as populations grow.
Rent Growth Momentum. Many secondary markets see rent growth faster than primary markets because of outsized in-migration.
This combination supports consistent cash distributions—especially when paired with preferred returns.
The Value-Add Advantage in Secondary Markets
At Amethys Projects, value-add multifamily is our core strategy. Secondary markets are ideal for value-add execution because they offer: older properties that are structurally sound, large supply of Class B and C buildings, motivated sellers, low renovation competition, strong renter demand for modernized units.
Typical improvements include: upgraded kitchens and bathrooms, stainless steel appliances, in-unit washer/dryer installations, new flooring, smart-home solutions, exterior upgrades and landscaping, amenity renovations.
The result? higher rents, better tenant retention, increased net operating income, higher property valuations
This is how real estate syndications build equity rapidly.
Tax-Efficient Wealth Creation Through Secondary Market Assets
One of the most overlooked advantages is tax efficiency. The combination of: cost segregation, accelerated depreciation, bonus depreciation (when applicable), debt amortization, 1031 opportunities, means accredited investors can often shield a significant portion of their investment income.
Secondary market properties purchased at lower cost bases also allow for greater accelerated depreciation benefits because there is more “improvable” property per dollar.
Why Limited Competition Creates Outsized Returns
Large institutional buyers prefer 300+ unit Class A assets in primary markets. This leaves a gap—particularly in:
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80–200 unit multifamily
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Class B and Class C assets
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garden-style communities
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properties built between 1980–2005
This size range is perfect for private operators and accredited investors. The lack of competition means:
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better purchase pricing
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stronger negotiating leverage
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less bidding pressure
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more value-add opportunity
Strategic investors can acquire properties at significant discounts relative to replacement cost.
How Amethys Projects Evaluates High-Growth Secondary Markets
Our market evaluation framework includes:
1. Population Growth. Is the city growing faster than the national average?
2. Job Diversity and Stability. Are there multiple strong industries supporting the economy?
3. Rent vs. Income Balance. Is there enough affordability headroom to support upward rent movement?
4. Supply Constraints. Are new developments limited enough to prevent oversupply?
5. Landlord-Friendly Regulations. Can renovations, rent adjustments, and operations be carried out smoothly?
6. Competitive Landscape. Are institutional players oversaturating the market—or is there room to strategically acquire properties?
Only markets that meet all of these criteria move forward in our acquisition pipeline.
Why Accredited Investors Benefit Most
Secondary markets align perfectly with the needs of accredited investors seeking: passive income, long-term appreciation, lower volatility, reliable tax advantages, recession resilience, transparent reporting, co-investment alignment.
Through 506(c) offerings, we provide these investors access to opportunities traditionally held by institutions—while maintaining full transparency and skin in the game through co-investment.
The Bottom Line: Secondary Markets Are the Future of Multifamily Wealth
The migration patterns are clear. The economic fundamentals are strong. The demand is undeniable.
Western secondary markets offer: better risk-adjusted returns, stronger cash flow, more sustainable population growth, higher demand for workforce housing, superior value-add opportunities, less institutional crowding, greater tax efficiency.
For accredited investors seeking a long-term vehicle for wealth creation, these markets represent one of the most compelling multifamily strategies available today.
At Amethys Projects, our mission is to help investors grow and protect their wealth through strategic acquisition, renovation, and management of multifamily assets in exactly these types of markets.
