As you all know, there are a lot of reasons why multifamily investing is popular right now. The most important of these reasons is that certain trends are driving the successes of apartment complexes.
A decade after the financial crisis of 2008, apartment sales have gone up while capitalization rates have gone down. Demand remains robust and lending requirements have been eased out, creating a highly profitable environment for investors.
Notwithstanding the resurgence of the single-family market, the multifamily sector has had powerful gains during the past 6-7 years. One thing’s for sure, government policy is not the only factor that made these achievements possible.
Market trends are also playing a vital role in the growth of the multifamily sector. In particular, demographic attitudes towards home buying have impacted supply and demand, thereby contributing to the success of the sector.
No doubt, these generational trends have provided investors a good reason to make the shift towards multifamily properties.
Let’s look at these trends in more detail:
75 million Baby Boomers are headed into retirement
One important development to watch out for is that fact that members of the Baby Boomer generation are downsizing. Many of them plan to move out of their homes and retire in apartment complexes outside the urban centers.
This would drive demand for multifamily housing further, creating enough mobility to attract investors to this sector.
As a result, we will be seeing more apartment complexes transform into retirement communities. The value of these properties will no doubt increase as owners are also investing in renovation projects to facilitate the conversions.
Most millennials are not buying homes
Millennials will continue to shape society in not too subtle ways, to begin with. In real estate, we will be seeing many of these young adults refuse to buy homes in the suburbs, opting instead to live their professional lives as renters in trendy communities.
The lifestyle choices these millennials make will no doubt bring a significant impact to the multifamily market. And as incomes for this demographic continue to increase, we can expect highly profitable markets to emerge in the coming years.
New constructions have become costly
Demographics are not the only drivers for success in the multifamily sector. The fact that construction costs have increased over the years has directed investors towards pre-existing multifamily properties.
Nowadays, it’s important to be a lot wiser when it comes to making crucial decisions as an investor. And given the situation of the construction industry today, it will be much more practical to leverage existing inventory.
It’s for this reason that investors would prefer to purchase multifamily properties, implement renovation projects, and set up value-adding components. These strategies offer a more practical way of securing better cash flow.
By leveraging these trends, you will be able to come up with an effective investment strategy for generating a healthy cash flow.