One of the largest of the four commercial real estate asset classes, along with office, retail and industrial, multi-family has a growing share of institutional investor’s portfolios and on everyone’s mind even the individual investor looking to capitalize on trends that have been accelerated post pandemic. 

Multifamily provides dozens or hundreds of individual rental agreements, minimizing vacancy exposure even during economic downturns making it a strong hedge against inflation. Multifamily also has predictable and available financing due to the promise of a reliable monthly cash flow from rental income. Many would-be first-time homeowners are being priced out of the market making multifamily a strong investment providing housing for those who can’t afford to buy single family houses. 

Additionally, due to the lack of inventory there is an increase in rental demand and a lot of rental renewals. Lease renewals are ahead of new leases, renters are staying in their units. Multifamily has been top of mind for investors locally and globally, with a quarterly record reported from Fannie Mae of $63Billion in Q4 of 2020 in just multifamily transactions. This trend has been ongoing since the pandemic and there is a ton of money to be made by investors.

Pros

1. Cashflow- The most attractive benefit to investing in multifamily is the reliable monthly cash flow from renters. With multiple units, even if there is one vacancy you are still receiving cash flow from other units. If your rental income exceeds your net operating cost(NOI) including mortgage, insurance, taxes, property management and maintenance, then you can expect consistent cash flow.
2. Easy to finance– Due to the cash flow nature of multifamily, the banks consider multifamily more predictable than single-family and shopping for a lower interest rate is a best practice.
3. Scalable-When growing your real estate portfolio, investing in multifamily allows for faster growth and opportunity. The larger the multifamily the even greater the cash flow opportunity.
4. Tax benefit- When in investing in multifamily you can deduct operating cost, including property management fees, maintenance, repairs, insurance, and marketing cost. In the long term you also take advantage of real estate depreciation and cost-segregation tax benefits as the building ages although the value of property is rising.
5. Passive Income-Cash flow, Cash flow, Cash flow! With a strong management company in place managing the day-to-day work with tenants, multifamily allows for a great way to earn passive income.

Multi-Family Trends 2022

• Explosive growth-rent growth as metro areas bounces back from pandemic
• Strong demand– low vacancy due to lack of housing available
• Lease renewals– renters cannot afford to become homeowners and are sticking around
• Ton of global and local competition from investors-rents held up even during economic downturn leaving tons to be made by investors
• Ongoing demand to keep up with supply shortage-due to demographic shifts, new homeownership at all time low, zoning, and underbuilding of multifamily in working-class areas the demand will continue