7 Reasons to Invest in Multifamily Properties for Sale in 2022
Considering an investment in commercial real estate? Want to build a successful portfolio with an attractive rate of return? The decision to invest in multifamily properties for sale may be a solid option for you.
The U.S. multifamily real estate market enjoyed a record-breaking year in 2021, according to a new report by CBRE. In fact, this sector set multiple records last year with a total investment volume of $335.3 billion, an absorption of 617,500 units, and the national vacancy rate falling to 2.5 percent (a decrease of 2.2% year-over-year). The whopping investment volume is nearly double the previous record of $193.1 billion in 2019.
The unexpected multifamily real estate market boom in 2021 was bolstered by strong economic conditions and demand for multifamily assets. The typically popular retail, office, and hospitality markets showed slow recovery. This led to commercial real estate investors shifting to invest in multifamily properties for sale. 2021 reinforced the resiliency of the multifamily market.
The U.S. multifamily real estate sector is set to have a record-breaking 2022 as well! We’ve already seen a strong start to 2022. In the first quarter, multifamily investments reached $63 billion, a 56% year-over-year increase. Q1-2022 was the strongest first quarter on record. Based on these numbers, the 4-quarter total projection in 2022 is $374 billion. The multifamily sector continues to dominate commercial real estate investment volume; in Q1-2022, 37% of total investments were multifamily properties for sale, followed by the office sector at 21% and industrial sector at 20%.
So, what are you waiting for? Below are seven reasons why you should consider investing in multifamily properties for sale.
Why Invest in Multifamily Property for Sale?
There are many beneficial reasons to invest in multifamily properties — which are often apartment complexes. These reasons include reliable cash flow, easier to finance, quicker to expand your investment property portfolio, better management options, passive income, great potential for appreciation, and high demand for tenants. Buying a multifamily rental property for sale is a solid and often “safer” strategy for commercial real estate investors.
Reliable Cash Flow
Investing in multifamily properties can result in a monthly cash flow that you can rely on from rental payments. Even if one unit becomes vacant, you can still count on cash flow from other tenants.
Financing is Easier to Obtain
Securing a loan for multifamily real estate is surprisingly easier than it is for a single-family home, even though the former can be much more expensive. However, you’ll be able to secure a single loan on multiple units as opposed, which is cheaper in the long-run. Lenders will often consider the property’s potential for making money rather than basing their decision on the buyer’s credit. Because multifamily properties generate a strong and steady cash flow, many consider this type of property a lower-risk investment.
If you’re not convinced yet, consider this example: You have twelve tenants in your building, but one decides to vacate their property. That loss only equates to approximately 8 percent of your total occupancy; having a larger group of tenants within one property reduces your overall risk. Compare that to a single-family dwelling where losing a tenant may cost you 100% of your income for one or two months until you find a new tenant; it could also drop your yearly profit down to zero or even put you at a loss.
Faster to Build Your Investment Property Portfolio
It’s much easier to acquire twelve units in a multifamily property than it is to buy twelve separate single-family homes. Rather than obtaining twelve real estate appraisals, organizing twelve inspections, securing twelve loans, and possibly working with twelve different real estate brokers or homeowners at various locations, you can invest in a twelve-unit multifamily building and focus on each aspect only once. Investing in multifamily properties that include five or more units are typically categorized as commercial real estate investing, and provides better cash flow opportunities. By acquiring one or more multifamily properties for sale, you will save time, energy, and money; not to mention that you will quickly build a significant, income-generating commercial real estate portfolio!
Cheaper and Easier to Manage
Multifamily properties have a smaller cost per unit since they have many shared services and features; thus, resulting in lower expenses and a positive net monthly income. Maintaining one property with twelve units is much easier and cheaper than doing the same with twelve separate houses. This gives you more opportunities to update the property and increase its value. With a better cash flow, you’ll also have extra funds available to hire a property management company.
Investing in multifamily properties for sale is usually an excellent way to earn passive income. As mentioned above, with more cash flow, you’ll be able to hire a property manager or property management firm. An on-site property manager will take care of many (or all) day-to-day property-related tasks for you. You’ll now have extra time to evaluate other investments and continue to grow your commercial real estate portfolio.
Higher Potential for Appreciation
Ensure your multifamily property is well-maintained and offers amenities that will attract and retain ideal tenants. Doing so will allow you to raise rental rates and fill vacancies quickly. Making upgrades, such as adding security cameras, laundry rooms, and usable communal living spaces give you the opportunity to positively impact many tenants. Doesn’t it make sense to invest a relatively smaller amount of money to increase the satisfaction of multiple tenants, while growing the overall value of your property? Additionally, certain renovations, such as updating the building’s exterior, only need to be done once for a multifamily property; whereas renovations to single-family properties would need to be done individually, resulting in multiple projects for each type of update.
Maintaining your property to a high standard and securing a strong cash flow gives your multifamily property greater potential to appreciate over time. This translates to increased equity when you decide it’s time to sell.
Demand Is High
Multifamily properties for sale are in high demand, and the sector is forecast to grow. What is driving demand? First, Baby Boomers are retiring or preparing to retire, which is causing a vast influx of tenants into the multifamily market. With their children leaving the nest, Baby Boomers are downsizing in favor of a smaller space. Also, there is still a high percentage of Millennials who are not buying homes because they are either unable to afford them or choosing to invest their money elsewhere. Rental properties and condos are appealing because they offer updated amenities, higher-quality conditions, and added conveniences.
Are you ready to make your next strategic move and invest in multifamily properties for sale?
As an industry leader in the commercial real estate market in Columbus, Ohio and Central Ohio, The Robert Weiler Company continues to take part in the growing multifamily housing trend. It’s one of the reasons why we made a significant investment in HighPoint on Columbus Commons in Downtown Columbus several years back; it’s also why we continue to make strategic investments throughout the region today. As urban populations increase in density and priorities are shifting to preserving or developing more green space and better public transportation, we anticipate continued growth in this area.
Are you looking to invest in rental properties or multifamily properties for sale? Call us at 614-221-4286 to find out how you can leverage our multifamily brokerage expertise to make the best investment possible.