Harvard’s 2019 State of the Nation study indicated that 35% of American households rent. In fact, by October 2018, only 56% of American households could afford to buy a home. In 2012, this number was 78%. However, as of 2019, the demand for rental housing has outpaced its availability.
As the demand for multi-family rental properties grows alongside rising rent rates, investors are taking advantage of the outpacing of aging properties against newer ones. By capitalizing on the value of older properties, investors can generate better returns. That’s why there has never been a better time to invest in multi-family real estate.
Breathing new life into decades-old properties
The number of rental units under 10 years old has significantly decreased while the amount of older units has increased. While labor and land costs soar, developers are looking to utilize older properties that could be rehabilitated. We see this trend across many cities, especially those that have seen a rebirth after the economic downturn of the late 2000s.
In this case, desirability lends itself to a greater willingness to pay higher rent. By rehabbing and revamping Class B and C properties of depreciating value, potential renters will find them more appealing. Applying cosmetic and small structural changes to rental properties can increase their allure, but also allow for rents to be adjusted slightly upward.
But by continuing to maintain competitive prices, this approach allows for better potential investment return. Determining a sufficient level of value-add opportunity in a neighborhood helps to assure rent growth.
If you’ve made the decision to invest in multi-family real estate, which approach should you take?
There are typically three approaches to multi-family property investment:
- Direct ownership
- Real estate syndications
- Multifamily REITs
Depending on your situation, you may want to take more of a hands-on or hands-off approach. Do you want to dive in and make the hard and fast decisions regarding a renovation, like paint color or tile choices? Or would you rather have someone else make the trickier decisions for you?
For those that want to avoid the potential stressors that come with being a direct owner of a property, or those who are individual investors, investing in apartment REITs are a good way to diversify, along with providing management of the property.
So, how do you choose?
With Pantheon Investments, you’ll be stepping into a scenario where we have targeted exclusive opportunities with exceptional risk-adjusted returns. We focus on markets with the potential for appreciation and only set you up with the people we like and trust.
Learn more about the potential of multi-family real estate investments in our white paper, 10 Reasons Why Multi-Family Real Estate Beats Stocks.
The Future of Multi-Family Housing
5 Reasons to Invest in Multi-Family Real Estate Syndications
Tax Benefits of Multi-Family Real Estate