There are so many reasons as to why Multifamily property investments have been a smart bet in the last few years, and still continue to be. Here are five of our favorite reasons:
1. Thriving Urban Cores and City Centers
A Growing trend in 2018 and 2019 is that many Millennials are moving in closer to city centers to take advantage of the live-work-play amenities that come with living in an urban core. This is most definitely the case here in Dallas, TX.
Historically, the current age range of the Millennial generation should be buying more homes, however, most are electing to continue to rent within urban core areas to continue to pay off existing student loan debt, and reduce their costs in areas like transportation.
Additionally, as Baby Boomers begin to find themselves with empty nests, they are beginning to “right-size” by selling off their larger single-family homes and moving into multifamily homes or apartment buildings, usually within urban cores to take advantage of the same close-in amenities like grocery stores, dining, entertainment, and nightlife.
With both generations flocking to metropolitan areas, the demand for multifamily units is certainly in the boom cycle.
2. Increasing Construction Costs
Previously existing property is becoming more popular to invest in as construction and material costs increase year over year. These existing properties and communities are also increasing in occupancy, as initial rent costs in newer buildings tend to be much higher. This is a very big factor as to why there is an uptrend in apartment investments over the last year. Investors are seeking out the best deals in established apartment communities, as they provide better returns.
3. Instability in Stocks and Bonds
As trade scuffles heat up between the world’s largest economies, the instability of the traditional markets is causing conventional market investors to seek out more secure places to allocate their investment money. Investing in apartments can further grow or diversify their investment portfolio, giving them more flexibility and cash-flow. These investors are starting to see much better ROIs than their traditional S&P, IRA, and investment funds, especially in markets where demand for housing is increasing.
4. Millennials are increasing demand for units, as are baby boomers.
The millennial generation is faced with a new set of steeper challenges than the generations before them. Most are having to rent for longer periods due to:
Student Loan Debt:
Millennials are opting to rent for increased periods in efforts to pay down their student loan debts before buying a single-family home.
Preference for starting families later in life:
As opposed to the Baby Boomers, most millennials are choosing to start their families much later in life. As mentioned above, they are prioritizing and committing to paying off debts and hitting career and financial milestones before they begin to start their families, and eventually purchase a single-family home.
Re-thinking the conventional “American Dream”:
Millennials are increasingly rejecting the notion of the conventional “American Dream”, ditching the idea that they need a large amount of square footage to have an increased quality of life. Experiences are becoming more valuable than tangible items in today’s world, and the traditional American Dream is falling by the wayside with the shift in what is valued. Keeping living costs low in relative terms, allows them to spend their money on experiences that add value to their lives.
Baby Boomers are flocking from their now empty nests and are opting to rent in efforts to adjust their lifestyles and increase their quality of life. As retirement age approaches, they are preparing to spend less time in their living spaces, more time traveling, and doing leisure activities that they enjoy.
5. Multifamily Properties Consistently Hold Their Value Over Others
While Single-family home values are impacted by many factors, multifamily property shares only a few of those. The single-family home market tends to be much more volatile. Factors like the overall housing market, construction costs, property tax, HOA’s, and local economies can all impact the value of the home, and one’s desire to live there. Office and retail property also tends to be quite volatile, as businesses are always changing to meet the needs of their markets, their demand, and their size.
Multifamily properties are rarely affected by these factors and only have a few key factors that help uphold and increase its value. Maintenance, grounds keeping, and amenities are the biggest factors here. Tenants want a safe, clean, and welcoming place to call home where families can thrive and if you can achieve this with your properties, you’ll maintain and increase the value of your property year after year.
These are just some of our favorite reasons why Multifamily apartment investing continues to dominate in 2019.
Are you investing in multifamily properties? Would you like to further your education and knowledge in apartment investing? Check out Brad Sumrok’s online courses, mentoring program, and live events here!