In 2017, multifamily property developments have shown their popularity. What are investors noticing in this niche? What strategies will help real estate investors get the most out of their apartment buildings? There are reasons why this market is so appealing. Here are the trends, and a little insight, into what may help investors create units that are in high demand by renters.
Lowered cap rates
With increased demand, properties are going for top dollar. This results in compressed cap rates. Investors would be wise to look for off-market deals which could give a better return. If you can find the properties yourself, you could skirt the multi-offer bidding match you will face with publicly listed properties. Take advantage of low interest leverage or equity partners— or the combo of the two— to help catapult your cash returns to a higher level.
Single to Multifamily Moves
The sales increase seen recently can be attributed to both foreign investors and single home investors moving into apartments. The move to larger builds on the desire for returns and deal flow. This year was my year to move up to apartment buildings from single-family properties. It’s an exciting jump, but it’s the benefits that appeal to me. It’s so much less total time to acquire a 46-unit building than doing that same number in single family homes.
Job Growth & Wage Increases
2017 makes it appear that job growth is going up. As long as the stock market keeps performing, jobs should stay steady. Wage continues to show promise as well with increases being noticed in earnings. These elements have the potential to lead to better performance and long term sustainability for landlords of multifamily units. Wage increases and job growth may also provide the fuel for rental rate increases.
Extra and convenient amenities
The goal of a healthier lifestyle, need to look good for social media, and busy schedules have created an added want for convenience and additional perks to a living situation. Multifamily Executive found that over 50 percent of tenants want on-site fitness facilities. The need for a gym in their building is what 82 percent of tenants name as one of their top five amenities. These fitness gyms can range from modern to well equipped.
Pet friendly
Pets play a huge role in many people’s lives. Surveys have shown that Millennials put their pets ahead of spouses or kids when it comes to where they live. Tenants often don’t accept a place because it accepts pets, but are only interested in properties that have amenities that cater to their pet. This includes features like outdoor spaces, pet spas, and more.
Let’s Go Green
Green leases are a big part of multifamily renting in this day and age. Leasing agents no longer have to sell these green leases, but instead, renters are demanding them. Buildings with elements that “make them green” are charging premium prices. It is big business for managers who hope to increase a bottom line.
Technologically Advanced Upgrades
Smart homes and smart apartments are no longer a “wow” to many tenants. People expect tech to be part of the spaces that they rent. In today’s word, smart lighting and temp control are standard. You wanted to know about that locker to ship your Amazon Prime goodies? Yes— that exists too.
Changes to property intent
As the housing market changes, we see that reflected in multifamily properties. Depending on which direction the market moves, condos can be adjusted to rentals and rental units can be changed to condos.
Summary
It’s a unique market to invest in multifamily units. There are many great opportunities— if you know where to look and how to manage your investment correctly. The margins are good right now and might not stay that way for long. Trends are always changing and evolving; which gives investors the chance to be at the front of the exciting market. It’s time to step up and give renters the types of units that they really want.
