When deciding to invest in residential real estate, clients often come to us with a big question: Which is better: Single-family or multifamily properties?
While the decision will ultimately be up to you, it’s hard to deny the new potential that comes with multifamily real estate investing. The days of new households flocking to suburban tracts are gone; instead, they’ve been replaced with a new desire to live in multifamily housing.
There are several reasons for this. Before you decide to invest in one kind of residential real estate, it’s critical that you are aware of the current residential economy and what people these days want.
Remember, you can always talk with the experts at CTG Real Estate Services for more information when it comes to investing and managing residential properties. In the meantime, learn more about the current demand for multifamily properties in the U.S. below.
1. Most new households are renters living in multifamily properties.
Gone are the days in which newly married couples and college graduates were able to easily buy houses with a small down payment (and, frequently, their parents’ assistance). The rising cost of living has made it much harder for young people to buy any kind of living space, especially single-family homes.
In response, the percentage of renters has skyrocketed. Between 2005 and 2016, 91 percent of all newly formed households were renters, and renters currently occupy 87 percent of the units in multifamily properties. It’s a trend that’s not expected to change anytime soon — and a great opportunity for new investors in the residential property market.
Keep in mind that the American family makeup has been drastically changing over the last few decades. While there are still many “traditional” two-parent households, there is a growing number of blended families — single parents, previously divorced parents blending two sets of children together, and more. Multifamily housing provides options for many varieties of family makeup given its options with room number and structure.
2. A great deal of the nation’s job growth is found in urban areas — where availability of land is sparse.
From 2000 to 2010, population growth in urban areas outpaced the national average by 25 percent. Urban areas are becoming the new “go-to” spots for jobs and the type of lifestyle that many young people desire. Today, more than 50 percent of the world’s population is urbanized, a number that is expected to grow to more than 60 percent by 2030. Urban centers are a hub of global economic power — but they’re not exactly ripe with living potential.
Because cities are so popular, and land is often expensive (or already occupied), developers are forced to be creative in their living spaces. To get the most bang for their buck, they create multifamily properties for an eager population of city-dwellers.
3. Tenants are looking for affordable housing options in otherwise expensive areas.
While cities are often the best places to find jobs, they are also notoriously expensive for those living and working there. Newcomers to the cities, especially younger people and new families, don’t have the means to spend a great deal on their living arrangements and look to low-cost multifamily housing to fulfill that need.
For tenants and real estate developers, multifamily housing provides the perfect affordable option. Local governments can offer soft loans and the low-income housing tax credit to developers, and, often, developing multifamily homes will be more affordable for a real estate developer. That, in turn, passes the lower costs along to residents — who, when satisfied, will stay longer and generate more profits for the developer.
4. Multifamily properties are increasingly offering amenities that single-family homes cannot.
Residents of multifamily housing in urban areas aren’t just looking for low-cost living; they are often looking for amenities that make their living area more than just a place to sleep at night.
The best multifamily properties in urban areas tend to offer a few benefits to residents, such as:
- Green spaces
- In-house amenities such as fitness rooms and work spaces
- High-quality design and furnishings
- Private patios and balconies
- And more
In addition, multifamily properties in urban areas are often serving as more than living spaces for developers to rent out. A growing trend involves developers utilizing empty space as retail space. When a developer rents out his ground floor for a grocer, clinic or other retail buyer, he gains extra profits and a satisfaction from his residents who are given what they need within walkable distance (a great plus in a city where parking may be scarce).
With all the benefits of multifamily housing, it’s an industry that should continue to grow as more young people enter the housing market. If you’re not sure where to start with your multifamily housing investments, Chris Gardner is here to help. Schedule a consultation with him today to get your real estate investment projects started on the right foot.