Investing in real estate is a great source of income, and multifamily investments are no different. In fact, investing in a multifamily property may be one of the more profitable choices of real estate. There are many reasons for this, with the most prominent being that during the 2020 global pandemic the multifamily real estate remained relatively stable in comparison to the majority of other industries and markets. Proving that the profitability of multifamily investments will not be going away in the near future, and is here to stay. The evidence of income in the multifamily industry includes generational shifts, supply changes, and that tenants continue to pay rent in difficult times.
The first reason for the constant multifamily profits is the generational shifts. The driving force of this is Millennials, as they’re renting longer and don’t have the more traditional dream of owning a home. The benefits of renting appeals to many, as there is a lower barrier to entry (no down payment) and there is more flexibility as renters have more freedom in moving. Tenant turnover has also been decreasing, paired with the increase in demand and it makes sense why multifamily investments are continuing to be a good source of income.
Secondly, multifamily properties are profitable due to recent supply changes. Developments of multifamily buildings have been slower due to market uncertainty. This uncertainty comes from the fact that renters are travelling from high dense and high cost areas to less dense and more affordable areas. With fewer multifamily properties in these regions, there is an increased demand with a lower supply. Resulting in a higher demand and a higher profit for multifamily property owners.
The final reason that will be discussed is the fact that housing is a basic necessity. In difficult times such as the 2020 global pandemic, tenants were still able to pay the rent. The statistic showed that when compared to 2019 the payment for a given month didn’t decrease over 2%. This isn’t as unreasonable as some may assume, since the government provides financial aid in order for citizens to be able to fulfill their needs. This just goes to show that multifamily properties remain profitable throughout challenging periods as tenants find a way to pay rent and fulfill their basic needs.
In conclusion, the profitability of multifamily real estate is undeniably one of the most constant types of investments as proved during COVID-19. Further trends and pieces of evidence such as generational shifts and supply changes continue to prove multifamily buildings provide a good source of income and will remain to do so for the coming years. To find your next multifamily investment project view our exclusive listings, or contact Kamil Lalji to gain professional real estate advice.