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MultiFamily Real Estate: For Investors Who Want a Balanced Portfolio

Good balance keeps you from falling over.

In all areas of of my life, I strive for that healthy balance – of work and play, family and business. This balance should carry over to your financial health as well.

Why do I feel that a balanced portfolio should contain multifamily real estate?

Now more than ever, some measure of protection against the natural volatility of the stock market is becoming more attractive even to more traditional investors. I am no hater of Wall St.— diversification is always the smart play.

This alternative investment strategy provides the tax benefits of real estate coupled with the dramatic growth within the multifamily market overall.

Let’s examine the state of the market in general, discuss the benefits of owning multifamily real estate and focus on the drivers behind the performance of the market.

What’s Driving the Apartment Market

There has been a dramatic decline of home ownership, from 69.2 percent in 2004 to 63.4 percent in 2015. This is the lowest rate of home ownership since 1967, according to a report from the Joint Center for Housing Studies of Harvard University. Interestingly, this figure is not contained to only one demographic segment of the population.

Many factors have contributed to this decline:.
• The foreclosure crisis fell largely on Generation X’s shoulders – they didn’t have enough equity to make it through the recession, and largely won’t be able to buy a home again.
• The student loan burden of Millennials: the average student loan debt is $32,000 per graduate, according to the Institute for College Access and Success.
• An aging Boomer population that has a fixed income

Despite an uptick in household creation, as Millennials move out of the family home, home ownership number is not increasing, as apartments become a lifestyle choice, as opposed to the only alternative.

Even with the massive expansion and construction that we see in the multifamily market, the vacancy rate fell to 7.2 percent, the lowest in 20 years. At the same time, rents rose faster than inflation, at 3.2 percent, and professionally managed buildings (as all of our properties and our client’s properties are) as high as 3.8 percent. That’s without making a single improvement to the property; that’s just the trending market increases.

If job growth continues its current increases, the apartment market will also continue its monster growth.

On the single-family side, recovery has been slower than expected. Gen-Xers, who would be the primary group to trade up to a larger home, either don’t have the equity in their home, or lost their home entirely in the foreclosure crisis. With tighter credit standards, it will be challenging to be a home owner again. They will remain in rentals, and largely apartments.

The time has never been clearer to add multifamily real estate to your assets.

To find out how we help individuals add apartments to their balance sheet, we are hosting a 2016 Kickoff Webinar January 6. You can register here.


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