Investing in multifamilies can be an excellent opportunity for existing and aspiring landlords alike. Interest rates and apartment vacancies have been low in recent years and are expected to remain for the foreseeable future. Furthermore, owing to depreciation, investors may deduct part of the cash flows generated by the income-producing property on their tax returns, and private equity real estate investors can now access an expanding pool of attractive loan capital. In this article by Buying Apartment Buildings, we’ve compiled some convincing reasons why multifamily properties are the way to go this 2021.
1. More Accessible Financing Compared to Other Real Estate Investments
Mortgage loans for multifamily developments are easier to get in this market than for other property types. In recent years, the government-sponsored Fannie Mae and Freddie Mac have given $142 billion (or 42 percent of total multifamily lending capital). Another advantage is that multifamily vacancy rates are at their lowest since 2000. From a lender’s perspective, this considerably decreases the risk (which is advantageous to investors, of course, when it comes to terms and conditions). Rental revenue is significantly more reliable than income from an office or retail premises-based around a limited number of anchor tenants. In the latter scenario, a high tenant turnover is both expensive and time-consuming. In a nutshell, multifamily buildings provide reduced risk and more consistent income flow.
2. Steadily Increasing Gap Between Supply and Demand
The number of financially distressed young adults staying at home has significantly grown in recent years. As the economy approaches full employment and salaries rise, it is expected that this pent-up demand would result in an extra 3 million to 4 million renters. Meanwhile, the yearly supply of new apartments is just approximately 325,000 units.
3. Short-Term Lease Contracts Open Up to Faster Rent Increases
Another reason multifamily property may be an attractive investment is its adaptability to changing market conditions, allowing you the flexibility to raise rents in response to inflation. Whereas leases of five years or more are standard in other forms of commercial real estate (such as office and retail), multifamily leases are generally only one year. This implies that property owners will raise rents more simply and consistently when market conditions change.
4. Easier to Manage Than Scattered Individual Properties
Multifamily real estate is also ideal for property owners looking to create an extensive portfolio of rental units. Acquiring a 20-unit apartment complex is significantly more accessible and less time-consuming than purchasing 20 separate single-family houses. With the latter option, one would have to communicate with 20 separate sellers and undertake inspections on 20 distinct properties, each situated at a different address.
5. Caters To a Large Family Demographic
Families now have fewer reasons to consider buying a condo, thanks to multifamily housing developers. The standard of the apartment building has improved. New buildings are being built in a more environmentally friendly manner, emphasizing green space and recreational opportunities. Designs appeal to current lives by integrating technology with a customer-focused service attitude. As a result, apartments now meet many of the requirements that skyrocketed condominium demand previously.
Conclusion
While there are several advantages to investing in real estate, multifamily remains one of the sector’s most vital asset classes. Investors seeking well-diversified, less volatile returns should always consider allocating a portion of their portfolio to multifamily assets.
If you’re convinced that buying an apartment building is your best option, Buying Apartment Buildings is where the action’s at! With our expert, industry-guided insight, we can help you in buying your first profitable unit. Get a no-obligation offer today!