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Every year many investors find themselves faced with the decision of investing in multifamily vs stocks, bonds, REITs or other investments.

Even though stocks are hot right now, and most investors don’t wand to miss out on the wild ride of the Stock Market, multifamily remains a stable investment opportunity that investors from all generations can’t ignore.

In this article, I’ll provide you with several reasons why you should consider investing in multifamily real estate plus I will provide you with tips that you should consider using for finding your first multi-family property.

Rate Of Return

One of the first things that you’re most likely looking at when deciding on if you should invest in multifamily or stocks is the rate of return.

Thanks to a plethora of historical data available online, we know that during a 25-year period from the early 1990’s, through 2017, multifamily real estate produced the highest average annual returns of any commercial sector (9.75%), while having an extremely low level of volatility (about 7.75%).

Besides offering an awesome rate of return, multifamily real estate has also offered excellent stability for investors especially during trying economic times including the collapse of the tech stock bubble of the late ’90s, and the Great Recession of 2007-2008.

More People From All Generations Are Renting Instead Of Buying Homes

Over the past 30 years, the traditional “blueprint” that people followed was going to college after high school, graduate, and eventually buy a home that they would raise their children in.

In the 21st century, this plan has changed as more people from all age groups and generations are renting than ever before, and demand for rental properties has never been higher.

Instead of people in their teens and twenties renting, we’re seeing empty nesters and retirees choosing to rent too. This has naturally placed a big demand for rental housing in most states.

Thanks to data from the United States Census Bureau, we know that the Millennial generation is going to become the largest generation in the history of the United States.

As of 2016, 64% of millennials between the ages of 25 and 29 we’re planning on purchasing homes. The numbers decreased even more for older Millennials as just 45% of Millennials between the ages of 30-34 plan on buying homes proving that most people under the age of 40 are not following the same home buying trend as previous generations.

Why are millennials seemingly ignoring the “blueprint” of buying a home after college as their parents and grandparents had done before them?

The answer to this question depends upon location. For millennials who are living in states like California or New York, price was the number one reason why they chose not to move forward with purchasing a home.

For Millennials in other states, some of the reasons why they chose not to purchase homes included their desire to maintain the flexibility and mobility that they had enjoyed throughout their lives without having the responsibilities of homeownership.

Besides Millennials, Baby Boomers have also placed a huge demand on multifamily properties across the United States and around the world.

Thanks to a report from the National Multifamily Housing Council from 2017, we know that renters age 55 and up are responsible for up to 30% of rental households in the United States.

Big Demand For Workforce Housing

Yes, more people are choosing to rent vs buy homes than they were before but, another important factor to consider when analyzing why you should invest in multifamily properties is the increase in the demand for workforce housing nationwide.

What is Workforce housing? Workforce housing encompasses three types of properties including Class B and Class C apartments.

Sadly, thanks to the 2017 State of the Nation’s Housing Supply study, which was done by Harvard Research, we know that the construction of Class A Properties has increased in recent years while workforce housing has decreased.

I hope that we will see an increase in workforce housing construction in the coming years but until that time comes, investors can continue to expect huge demand for class B and C multi-family properties from renters of all generations.

Multifamily Properties Often Get Better Financing Terms Than Other Investments

Another great reason why you should consider investing in multi-family properties is the fact that investors who finance them typically get better financing terms than investors who finance other real estate investments.

For example, Thanks to data from Real Capital Analytics, we know that in 2017, investors who financed multi-family properties were able to get interest rates of 4.25% compared to the 4.5% mortgage interest rates that some investors were able to get when they financed commercial properties.

Tips For Buying Your First Multifamily Property

So far in this article, I provided you with several reasons why you should consider investing in multifamily properties right now, including the fact that demand has never been higher for Class B and C multifamily properties.

If you’re ready to start searching for your first multi-family property, here are several tips that you should follow:

Choose the right location – Even though a multi-family property is a great investment, you still have to thoroughly research the location that you intend on purchasing your property before you invest there.

Ideally, the location that you plan on buying a multi-family property should be a city or town that’s a walkable. This means that the multifamily property is close to shops, stores, restaurants end things to do that your tenants might enjoy regularly.

During the process of researching the location, you should also pay close attention to crime statistics for the area, school district information, you should also be mindful to read feedback about that area online because this is an excellent way to learn more about an area including if people are moving in or out of that location.

Overestimate Your Expenses – Another important thing to consider when you’re investing in a multifamily property is you should always overestimate your expenses. This is important because you want to have a cash “cushion” that you can tap into and use for any unexpected repairs.

Besides overestimating your expenses, you should also have the property professionally inspected just so you can verify that there is not any deferred maintenance which could pose a problem for you down the road.

You should also verify the property’s current cash flow to make sure that your income from the property is going to be higher than the costs that you’re going to have to pay every month.

Hire A Property Manager – Last of all, another important tip that you should follow when investing in a multifamily property is to hire a property manager. Doing this will save you the time, money, and hassle of managing that property yourself so that you can focus your efforts on growing your portfolio of investment properties.

Contact Trier Capital

Are you ready to invest in your first multifamily property but you also don’t want to have to go through all the steps involved with sourcing, acquiring, and managing a multifamily property? If so, the solution to the problem is to partner with Trier Capital.

At Trier Capital, we do all the hard work to find and acquire ideal properties, and then oversee asset management after purchase, while our investors sit back, relax, and receive tax-advantaged passive cash flow.

To learn more about how we can help you get started with investing in multifamily properties, contact me today by calling (630) 229-2383 or click here.


Erik Hatch

Erik is currently invested in projects in Florida, Texas and Kentucky totaling $79 Million. He is an accomplished leader who motivates and inspires action while at the same time, is grounded in business metrics and information that drives successful businesses.