MULTIfamily properties are typically a very popular investment when getting into real estate investing. If you mitigate your risk, you can likely create some excellent passive cash flow. It’s the part of real estate investing that tends to do better than other commercial areas, and it’s expected to continue that positive trajectory into the new year. Between the number of young adults looking to rent longer and the older crowd downsizing, we’re reaching what Dr. Peter Linneman has referred to as “the golden age ofMULTIfamily investing.” Here are some of the predictions for what the MULTIfamily property market will hold in 2022.
ROI is still impressive.
There are a few reasons why MULTIfamily properties are seeing some exciting trends right now. Many people are jumping into the housing market because of fear of inflation. Also, as we come out of the pandemic, interest rates are still low. MULTIfamily properties are also an excellent investment if you have the funds for a down payment. Whether you’re looking for a duplex to rent out one side and live in the other, or you want to purchase a fourplex solely for renters, you have an opportunity to make great money with the right tenants.
Lower interest rates make jumping into the MULTIfamily housing market more attractive and affordable. With the availability of 35-year-long abatements, investors can maintain a fixed operating cost for longer, resulting in a better return on investment, regardless of inflation and rent increases.
In the case of MULTIfamily homes, it’s expected that the yield offered by these properties for ROI will trend upward. Right now, it’s possible to find a 10% yield in many markets, and that’s a result of ideal borrowing rates.
The borrowing rates, supply of single-family homes, and demand create the perfect storm for interested investors. For those looking for a long-term investment, a MULTIfamily home is an ideal one.
The volume of transactions will continue to increase.
During the pandemic, the volume of transactions in specific real estate markets was relatively low. Still, in recent months it has exploded, and it’s expected to continue upwards. Buyers and sellers are beginning to meet in the middle, and there’s no clear indication of a buyer’s market or seller’s market when it comes to MULTIfamily properties. Potential investors see that there’s a decrease in vacancy rates and increasing rent prices in most urban areas. These conditions create an ideal investing environment. Many investors are working hard to make smarter purchasing decisions based on the events in the last (almost) two years.
For example, suppose you were interested in a MULTIfamily property in Chicago. In that case, you could easily invest for an affordable price, quickly and easily scale, and build your own management company. Doing so opens up plenty of other opportunities for you as an entrepreneur and investor.
Supply and demand will push trends positively.
It’s estimated by the National Multifamily Housing Council (NMHC) that residents of the United States will require over 4.5 million more apartments in the next eight years. The demand for MULTIfamily housing has always outweighed the supply. These estimations are further proof that it’s an excellent investment. The ideals of homeownership are shifting. The baby boomer generation is looking to downsize. As empty-nesters, they don’t require a lot of space, nor do they want to continue maintaining larger properties. The responsibilities of maintaining a single-family home far outweigh the responsibilities of living in a fourplex or condo. Millennials are another massive generation putting off homeownership due to financial restraints, student debt, or lifestyle choices. These two generations are among the largest in recent history, and trends within them significantly impact the housing market.
To meet the demand that the National Multifamily Housing Council has estimated, the country needs to build over 325,000 new units each year until 2030. These numbers might be a bit out of reach, as that amount has only been successfully hit three times in the last 32 years. With almost half of US apartments being constructed before 1980, there is a significant need for newly constructed, beautifully designed MULTIfamilyhomes that people will love to live in.
The benefits of MULTIfamily property investing are significant.
Regardless of outside factors, MULTIfamily homes are a beneficial investment in most cases. Of course, with any investment, there’s risk involved. You may encounter property damage, bad tenants, or expensive maintenance. However, if you do it right, you can come out ready to continue building your portfolio.
MULTIfamily homes are still part of one of the largest asset classes. The housing market is massive, and residences account for around 30% of consumer spending. Everyone needs a home, and being a great landlord can be a fulfilling venture. There’s plenty of room for growth and rent price increases. Increasing rent may allow you to have some extra cash flow that you can sink back into the property, which means you can charge more in the future. It’s a great way to maintain steady growth.
As mentioned, there’s a significant demand for high-quality and newly updated apartments in the US, so if you can provide that, you’re likely to garner a lot of interest in your property.
We have seen many economic changes in our lives, and MULTIfamily properties can possibly be a hedge against inflation. Using modern technology, shorter leases, and leveraging pricing tools, owners of MULTIfamily homes can continue to dodge inflation. MULTIfamily homes are an attractive investment, especially with excellent financing options offered by financial institutions. Taking advantage of inexpensive capital and low-interest rates, investing in MULTIfamily properties gives you a competitive edge.
An advantage of MULTIfamily properties is the liquidity of tenants. While other commercial properties, like office buildings, may house one company. If that company loses all its business, then the landlord is not in a great position. MULTIfamily properties can still thrive even with the occasional bad tenants.
Lastly, people will always need a place to live. Even during a pandemic. While vacancy rates may have hit the lowest in the last few decades in 2020, investing properly will help mitigate low vacancy rates.
There will be a divide between red and blue states.
Suppose you’re new to real estate investing. In that case, you may not have considered the government’s role in where you want to invest in your MULTIfamily property. With each state toting its own rules and regulations, it can be better or worse for you as an investor in certain major cities.
Places like New York City will have much more progressive policies in place that are pretty restrictive, so buyers are heading south to Florida and Georgia, where the rules aren’t as stringent.
Rules that apply to the ability to raise rent can make investors think twice about investing in popular areas or their home state. Higher property taxes and utility costs are also major considerations when keeping your costs down and profit high.
Suppose there continues to be policies put in place that are restrictive in certain areas. In that case, 2022 will likely see a further divide among investors who look to invest in areas with fewer restrictions.
MULTIfamily property investing has a stable foundation.
Suppose you’re investing in commercial real estate. In that case, MULTIfamily properties typically come out on top when it comes to other areas of real estate. As an essential asset, it has a solid and stable foundation that investors can have confidence in, which won’t change anytime soon.
Some people don’t have the time or money to rent a single-family home. They are more expensive to rent and require a lot of time when it comes to shoveling snow, raking leaves, mowing the lawn, etc. They also may not need the space that comes with renting a single-family home.
MULTIfamily homes are a necessity in the real estate world. Renting an apartment or condo is much more reasonable for many people trying to pay down debt or save up for the down payment to their first home. Regardless of how the economy is doing, people need access to affordable housing options.
MULTIfamily homes have historically been a relatively safe, lower-risk investment. There’s no reason to suggest that it will change in 2022. As a first-time or seasoned investor, being smart about where you’re putting your money is critical. A MULTIfamily property is likely going to be a healthy yield for you. The combination of demand, lower borrowing rates, and risk make getting into the MULTIfamily property investing world quite exciting.
Looking for the ultimate guide in buying your first fourplex? Check out our blog post here.
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