1. Compressed Cap Rates
As demand steadily increases, sellers are able to get top dollar for these properties, which leads to lower cap rates. For investors, off-market deals may offer more profitable options. Sourcing these properties yourself can help avoid the multiple offer competitions you’ll experience with publicly listed properties. Utilizing low interest leverage or equity partnerships (or a combination of both) can also help elevate real cash-on-cash returns.
2. Single Family Investors Graduating to Multifamily Housing
The increase in sales this year are expected to be a combination of both foreign investment and single family investors who are stepping up to multifamily apartments to feed their need for yield and deal flow. This year, I personally graduated from single-family investing to this asset class due to the many benefits it offers. It is far less time intensive to purchase a 46-unit apartment building than 46 single family homes!
3. Jobs & Wage Growth
Job growth appears to be robust in 2017. That should last as long as the stock market keeps performing. Wages also appear to be finally growing slowly. This could build in more sustainable performance for multifamily landlords. It may also provide more fuel for rental rate increases.
4. Amenities, Including On-Site Fitness
Due to the drive to live healthier lifestyles and pressure to look great on Instagram, when it comes to in-demand amenities, Multifamily Executive reports that 56% of renters are now “extremely interested” in on-site fitness. In fact, 82% of residents name this feature as one of their top five amenities. An exercise facility can range from modern and well-equipped gyms to outdoor jogging trails or fitness classes.
5. Pets-Friendly Spaces
Pets are playing a huge role as well. Recent surveys show that Millennials are even putting their pets ahead of spouses and kids when it comes to housing considerations. These tenants no longer seek places that simply accept pets; they look for properties that feature facilities specifically for their pets. That may include outdoor spaces, pet spas, and more.
6. High-Tech Upgrades
Smart home tech is no longer a rare “wow” factor. It is expected in many areas. Today, this includes features like smart lighting and temperature control, as well as lockers for receiving online shopping purchases.
7. The Rise of Green Leases
The Building Design and Construction Network says that green leases are becoming a big part of the multifamily sector today. Though leasing agents no longer have to sell those features, renters are flocking to them. Those buildings with green features are charging premium rents, and it is a big business for managers looking to increase bottom lines.
8. Pivots in Property Purpose
As the housing market continues to change, we once again see a notable amount of conversions of multifamily property. Depending on which way the market goes, condos can be converted to rentals, and rental buildings can provide exits to investors as condos.
lt’s an interesting time to be investing in multifamily housing. There are still good opportunities if you know where to look and how to structure investments right. We may not see spreads this good for a while. New and evolving trends are also giving investors the chance to be on the forefront of the changing market and step up to serve renters with what they really want.