If you are looking for the best option to diversify your real estate investments, investing in multifamily properties is one of the best decisions that can guarantee you higher returns. A multifamily property refers to multiple residential units that are contained in one building or group of buildings. The most common types of multifamily housing include; duplexes, triplexes, quadruplexes, apartments, and townhouses. The demand for multifamily investments has been on the rise for the past few years and we can predict that multi-families will continue to perform better in the coming years due to the following reasons.
- The demand for multifamily continues to rise
Despite the negative impact of the COVID-19 pandemic, the demand for multifamily investments has been on an upward trajectory. An increase in rental demand, rising building costs, and a limited supply of new multifamily units have been the primary factors that have contributed to the unprecedented high demand for multifamily properties.
Since the low supply of newly constructed homes is going to persist until the cost of construction comes down, the demand for multifamily housing is going to remain high in the coming years. In addition, the rising home prices and mortgage rates will also encourage more people to rent over homeownership thus, increasing the demand.
- Changes in demographic trends
Current demographic trends are favorable for multifamily properties. There is a huge demographic of millennials in our society today and they are finding it hard to purchase their first homes due to the current high home prices and expensive mortgage rates. When millennials delay in homeownership, they increase the demand for rental properties and multifamily residential properties will benefit a lot.
- Positive economic indicators
Most economic indicators that form the foundation of the success of multifamily property growth are currently positive and the future looks certain. There is an increase in employment rates and the situation is expected to continue improving as we go past the post-pandemic season. When many people are employed, it means they will have an easier time catering to their rental expenses and this will promote the growth multifamily property market.
The cost of capital for multifamily properties remains affordable despite the recent increase in mortgage interest rates and there is a high chance for a better return on investment due to the current high demand.
- Multifamily properties provide a good hedge against inflation
For real estate investors looking for investments that offer superior risk resistance against market inflation, multifamily properties are the best option. Most residential multifamily properties have short-term leases and when the rate of inflation increases, investors are able to adjust their rental rates to match the new market rates. The quick ability to provide a hedge against inflation rise will ensure that multifamily residential properties will remain the preferred investment strategy for risk-averse investors.
- Baby boomers effect
The high number of retiring baby boomers presents another positive opportunity for multifamily investments to thrive in the coming years. A bigger percentage of these age groups of people over 55 years looking forward to retirement will prefer renting a home to owning a home. In fact, many would prefer to scale down or sell their current homes to free-up equity that will be of great help during their retirement period. Baby boomers will therefore increase the demand for rentals which will definitely push rental prices for multifamily to even higher margins.
Therefore, investing in multifamily is the best thing to do right now as the future is promising.