Investing In
Multifamily Real Estate

We’re in the midst of a major shift in the baby boomer generation. A growing number of baby boomers are choosing to rent versus purchase. Many are being draw in to renting not because they have difficulty purchasing, but because the right multifamily property can offer a more “hands off” lifestyle. This hassle-free living can be complete with amenity rich surroundings, both of which greatly appeal to this demographic.

The National Multifamily Housing Council and National Apartment Association cited in a 2017 report that renters aged 55 years and above now account for more than 30% of rental households.

Although workforce housing can and does include families earning anywhere from 60% to 120% of their area’s median income, workforce housing generally refers to multifamily properties for middle-income households. Also called the “bread & butter” housing, these properties are typically Class B or in some instances, upgraded Class C assets. They may not quite have all the luxurious amenities one would find in higher-end complexes, however they target a price point in which the majority are comfortable.

It is noteworthy that new construction of Class A complexes has been on the rise in recent years. As such, the availability of Class A apartments has been outpacing that of updated Class B properties. For example, in the previous decade, the supply of rental housing increased by nearly 100% for higher-end units, while the stock of affordable units fell by approximately 2%.

According to the State of the Nation’s Housing Study, by Harvard Research, a key long-term benefit to investing in workforce housing boils down to simple supply and demand.

Introducing, the largest generation in modern American history; the Millennial Generation. According to data from the U.S. Census Bureau, the most common form of housing for the millennial generation is rental housing. In point of fact, the national rate of homeownership for the population overall in the US was 64%, it remained at only 31% for millennials aged 25-29. For those between the ages of 30-34 it was only 45%.

One of the driving forces behind this surge of millennial renters is the steadily rising cost of homeownership. This puts median home prices out of reach for many in this demographic. Additionally, millennials have a tendency to value flexibility and mobility over the benefits of owning a property, so well-priced apartments with appealing amenities are quite a draw.

Unlike many other sectors within real estate, multifamily allows for shorter-term leases. This makes multifamily apartment investing enticing, as shorter-term leases allow for quick adjustments during changing market conditions. An example would be, increasing rent quickly due to market demands or inflation.

Leases of five years or more are standard within the office, retail, and industrial, whereas multifamily leases are for roughly one year. As a result, property owners are easily able to quickly raise rents as market conditions change, increasing the overall bottom line of the asset.

Multifamily consistently receives better financing terms relative to other types of commercial real estate due to the stability of revenue streams. We’re currently in the midst of historically low-interest rates. Did you know that multifamily is one of the vehicles that enjoy preferential treatment within the mortgage market?