While the world suffered a lot during the pandemic there was a subsequent effect on the economy, market growth, development as well as investments. The economy is still on its way to recovery from COVID 19. The vaccine is widely available, and the majority of people have already been vaccinated with at least one dose. With improving economic conditions and loosening restrictions throughout the country, the outlook for multifamily investment has improved. The below trend of the demand and renewal conversion depicts the same.
Historic and Projected Annual Units Delivered by Data Provider Source Freddie Mac, Census Bureau
COVID 19 impacted different property types and unit sizes. In 2020, Class A properties were the worst hit to rent growth and occupancy, while the impact was lower in Class C. While the market is recovering, second-quarter data indicate a stronger rebound in Class A and B. Around June, year-over-year rent was up by 5.7% in Class B properties whereas class-A properties witnessed 0.6%. Class C recovered with healthy growth of just under2%. The occupancy rate of Class A units increased by 1.2%, while the occupancy rate of Class B and C units increased by 0.9% and 0.4%, respectively. Class A units were the least time vacant, with an average of 20 days, but these operators are offering the highest concessions. In May 2021, rent collections at Class A and B properties ranged from 94% to 95%, whereas those at Class C properties were about 7% to 8% lower.
The world has already observed one of the worst economic crises and it is slowly recovering. Here are a few reasons to look for why now is the time to invest in multifamily.
ON-DEMAND
Multifamily investments demand has never been so strong before. Housing is the foundational need of human beings and this sector has always been stable even during economic uncertainties. The markets and the rents may go up and down however the demand always persists. With the economy recovering people are looking for affordable and better localities for living. The rent collections in 2020-2021 have been at an all-time high with lower vacancy risks.
BEST INTEREST
Investors are always concerned about the potential interest rates hike while getting a deal financed. Due to the pandemic, the interest rates remain at an all-time low. The cap rates have remained the same since last year.
IMPROVEMENT IN THE INVESTMENT PORTFOLIO
It is a very useful investment to diversify and build a portfolio faster. It is always easy to buy a 20 unit multifamily apartment that purchasing 20 different single-family homes.
HIGHER RETURNS
Investment in multifamily has huge cash flow potential. Having high cash flow allows investors to easily and effectively re-invest. This will not only increase the portfolio but also the cash reserves for other expenses.
CONCLUSION
In short, multifamily remained strong even during recessions. They demonstrate relatively high resilience amid the pandemic. Interest rates for multifamily property acquisitions are at record lows. All of these factors conclude that it is now the perfect time to invest in multifamily.
Prashant Kumar, CCIM
If you’re still wondering where to
start from, we can have a
one-on-one session.
Prashant Kumar, CCIM
If you’re still wondering where to start from, we can have a one-on-one session.
