When considering what types of property to invest in, there are seemingly endless options and things to consider. Are commercial properties the best bet? What about single-family homes, land development, or becoming the landlord of a multi-family real estate investment? And then there’s your level of involvement to consider (in addition to your abilities). If you’re ready to dig in and get your hands dirty, perhaps land development is the perfect choice, whereas if you’re looking for something a bit more hands off, maybe owning commercial property is more your style. There’s also the opportunity to passively invest in real estate - that is, investing your funds with a company that provides financial backing to borrowers who will be the ones actually undertaking the building or renovation projects.
For many investors considering getting involved with real estate, and for many investment companies lending funds to developers and fix-and-flippers, one of the best options to consider at this moment are actually multi-family real estate investments. Keep reading to find out why investment companies - and solo investors - are turning their focus toward multi-family projects.
Baby Boomers Are Reaching Retirement Age
At first blush it may not seem like Baby Boomers retiring would have any impact on the multi-family real estate investment market. After all, Baby Boomers were raised on the ideals of the American Dream - that they should work hard, save up, own property, and then after years of hard work and dedication to their families and jobs they’ll be rewarded with a worry-free retirement - with the biggest portion of that dream being property ownership. However, as Baby Boomers are aging out of the workforce they’re also, in some cases, aging out of the desire to maintain their properties. They want to enjoy their retirement years free from worries about yard work and snow shoveling and many want the freedom to travel frequently and see the world. And so, they’re selling their single-family homes in established communities and renting apartments or moving into condominium complexes instead.
Apartment Complexes Can Be Converted to Retirement Communities
Along the same lines as the previous point, the aging population also has an effect on what could become of existing apartment complexes. As Baby Boomers and other generations of retirement age (or older) seek out retirement communities or assisted living facilities, they’re finding that there aren’t many options available. There are a number of reasons for this, but one of them is that in many areas there simply isn’t enough available space to build an entire community for retirees. However, if there’s an existing apartment complex that already has many of the desired amenities - and possibly many residents in the desired demographic - it could be a fairly easy conversion and a great investment for the right developer to get their hands on.
Younger Generations - Including Millennials - Aren’t Buying Homes
A generation or two ago, people were getting married, buying homes, and starting families at a fairly young age. Today, many Millennials are still paying off student loan debt, working on establishing their careers, and waiting until they’re older to tie the knot. Buying a house - while still a goal (and Millennials actually make up the largest demographic of homebuyers, just not like previous generations) - isn’t their top priority, especially as they move out of the suburbs and college towns and into large metropolitan areas for their jobs. And do you know where they’re living in these metropolitan areas? You guessed it, in apartment complexes!
For those that are ready to purchase a home, it’s also proving not to be the easy task it was for their parents and grandparents. For one, home prices have gone up substantially over the generations, and those older generations are still occupying the prime real estate locations as they either aren’t yet at retirement age, or are choosing to retire later. This doesn’t look to be a trend that’s going to hit a downward spiral anytime soon, so for investors and developers, multi-family real estate investments are a great way to build wealth and see positive returns.
Building New Units Is Getting More Expensive
Finally, one of the best reasons to invest in multi-family properties is that they’re simply getting more expensive to build new. Purchasing an existing property is a much less expensive proposition than purchasing the land and then footing the construction costs for a new property. There’s also the possibility that when purchasing an existing multi-family real estate investment you can purchase it with tenants already in place, which will save both time and money when it comes to marketing the property for occupancy.
Check out our Executive Summary below and then get in touch with us to learn more about how Walnut Street Finance determines which investment opportunities to back.