Is It Time to Invest in Multifamily Properties?
Multifamily properties and real estate have always stood the test of time. However, in the face of COVID-19, many real estate investors are wondering if they should invest in such a volatile market.
Well, the truth is, though things looked bleak earlier this year, people have finally begun to adapt to the new normal. As a result, individuals are still searching for apartments for rent online and making appointments to view available units in-person. Therefore, it appears as though the show must go on.
With that said, it is hard to overlook the impact COVID-19 has had on both residential and commercial construction or on people’s ability to pay rent. Even with the Coronavirus Aid Relief and Economic Security Act (Cares Act) providing over $2 trillion in emergency relief and clear late-rent forgiveness guidelines from the National Multifamily Housing Council, the market has not magically bounced back. So, what are real estate and multifamily investors to do? Well, for starters, it pays, literally, to look on the Brightside.
Looking on the Brightside
Real estate experts are optimistic about multifamily investing for several reasons. One reason, in particular, is that multifamily properties have always been long-term investments. In other words, you are not flipping houses or purchasing stock.
Multifamily housing involves management companies, leases (that often last longer than a year), ongoing construction/building, continued upkeep, maintenance, employees, and more. All of these things ultimately work together to cultivate a continued source of income. Plus, high and stable returns occur in the long term with real estate. Consequently, no matter what is happening in the short term, multifamily properties will, in the end, come out on top as they have time and time again.
Housing is Still a Necessity
Yet another real estate truth is people need roofs over their heads, in even the worst of times. Thus, despite rising unemployment rates, mass uncertainty, and an ongoing pandemic, housing is still a necessity. Moreover, even if people are displaced, lose their homes, or are just craving a change of scenery, the next viable step is to look for more affordable housing. A prime example of this is when people decide to downsize. Think about it, today’s homeowners don’t just throw in the towel because they no longer need their 6-bedroom house with ridiculously high HOA fees, do they? Instead, they generally look for adequate housing like manufactured homes for sale. Note, house foreclosures could also lead to an increase in demand for rental properties.
Interest Rates are Low
Furthermore, in response to COVID-19, mortgage and interest rates are lower than ever before. This means you are likely to be on the receiving end of an even greater return. Remember, the cost of a multifamily investment property is closely tied to mortgage rates and bond markets. By having a clear understanding of this correlation, you will know when it is time to sell, hold, or buy a property. Eventually, lower rates in this current climate will more than likely result in higher multifamily property values over time. As a result, now might just be the perfect time to invest in more property.
Tenant Turnover will likely Decrease
Likewise, in this current climate, experts are predicting an overall decrease in tenant turnover. This is beneficial for multifamily investors because tenant retention equals a reduction in total operation cost. In other words, fewer funds are being diverted for the sole purpose of finding and securing tenants. Plus, investment properties that stay rented maintain their cash flow. Thus, as you can see, COVID-19 may have slowed the market a tad this year, but there is definitely a silver lining for multifamily property investors.
In today’s new normal, there are more people than ever before working from home. As a result, there has been an increase in demand for at-home office space. Of course, you may be thinking, how exactly does this make investing in multifamily property more lucrative right now? Well, the answer is twofold. Young professionals living at home with their parents and cohabiting couples are no longer over the moon about spending every minute of their workday with family members or loved ones. Consequently, remote work and stay-at-home orders have motivated people, who normally would not leave the comfort of the nest, to go rent their own apartments or purchase manufactured housing in record numbers.
No More Vacancies
Along those same lines, there is also an expected drop in available units and vacancies. Besides a reduction in tenant turnover and more remote workers looking to leave the nest, there is an anticipated decline in new multifamily properties as well. In the event that all three of these predictions come true, vacancy rates will remain low in the long run.
Lastly, with the market being so unstable, one of the few remaining financial guarantees for your retirement or pension funds and trusts is multifamily property/real estate. Thus, this is just another reason you should be moving forward with your investments during this global pandemic.
Start Investing in Multifamily Real Estate Today
Multifamily properties are, for lack of a better term, resilient, and real estate experts remain hopeful, which are both good signs. Nevertheless, it is safe to say 2020 has shown all of us that even these particular investment opportunities are not immune to the adverse effects of COVID-19. Be that as it may, the overall situation is still very fluid. Yet despite this fluidity, there is likely to be an uptick in multifamily investments in luxury and secondary markets, if nowhere else. During such uncertain times, people looking to sell real estate quickly (stressed sellers) may pave the way for even more multifamily investment opportunities.
Even post-coronavirus, quality real estate may be readily available at discounted prices due to the seller’s financial challenges. This may lead to more lucrative investment prospects down the road as well. Ultimately, only time will tell how we recover from this pandemic; thus, in the meantime, you may want to consider investing in multifamily property.