There are many key benefits to multifamily real estate and as a real estate investor it is important to understand these benefits so you can make sound investment choices. Not only does multifamily real estate play an ongoing role in providing essential affordable housing for people across North America, it is often the best or preferred housing solution for many people at different stages in their lives for a variety of reasons. Given these factors and the many benefits of multifamily real estate discussed below, a portfolio of strategically selected, revenue-producing multifamily investments can easily be seen as an integral part of your retirement portfolio.
The Economics of Multifamily Real Estate
Multifamily real estate fills a diverse and significant market need while enriching the communities where they are located. The construction of multifamily properties enhances the economic vitality of a neighbourhood or region through the creation of jobs for building and creating the supplies needed for construction, as well as jobs related to the design, financing and management of projects. It also fuels the demand for goods and services needed for workers and residents, similar to a ripple effect that can often be felt throughout the surrounding region.
A balanced mix of housing options also makes a region more attractive to businesses looking to expand or relocate. Not only does this level of density provide businesses with opportunities to reach a wider market, the apartments and condominiums in the area can play an important role in housing a large segment of their workforce.
Multifamily Real Estate & the Environment
Multifamily housing is also a critical part of environmentally-minded growth. Well-planned higher density housing in areas designated for growth has always been an essential component of what’s called ‘smart growth’ since multifamily development is generally less environmentally disruptive than a comparable number of single family units spread over a larger area. These neighbourhoods are often considered more pleasant because of the preservation of open spaces and natural features like hillsides, streams and trees, as well as the creation of pedestrian-friendly areas.
In fact, concerns over urban sprawl have renewed public and private interests in the role apartments can play in creating more liveable communities since these properties tend to require less public infrastructure, including roads, sewer and water pipes, and electrical and gas lines.
Multifamily properties also tend to be located within close proximity to employment centres, public transportation and neighbourhood services as compared to areas primarily consisting of single family homes, which can become a leading component of urban revitalization. And because retail and commercial development requires high concentrations of housing units within a short commuting distance, multifamily housing makes it more financially feasible to incorporate these services into the neighbourhood. All of these factors in turn help to reduce the amount of traffic congestion and air pollution, while also creating more free time for residents.
Affordability & Other Factors that Fuel Demand
On a per unit basis, multifamily residential construction is generally more affordable than single family home construction, making it more cost-effective for purchasers whether they wish to rent or live in the unit. The lower cost often translates into lower mortgage financing and operating costs for the landlord, which in turn makes the unit more affordable to renters as compared to single family dwellings.
Although multifamily real estate serves a variety of lifestyle needs, the majority of renters enter the rental market out of necessity rather than choice. For instance, the vast pool of immigrants entering both Canada and the US often lack the capital needed to sustain ownership and will remain renters for more than 10 years on average before home ownership becomes feasible. Yet, there is a fast growing segment of the population that are choosing multifamily living for reasons other than affordability. These reasons can include reduced property maintenance responsibilities and cost, better security and the convenience that urban locations and high end neighbourhoods, in particular, can provide in terms of transportation and services.
In the coming years, the aging baby boomer population will continue to downsize from single family homes as their children leave the nest, increasing demand for both owner occupied and rental properties in familiar neighbourhoods that offer service clusters and convenient transportation. Meanwhile, the children of these baby boomers, often referred to as echo boomers, will be reaching the traditional age for renting or purchasing more affordable multifamily property as they begin to form independent households. Add to this improved design, new technologies, more attractive amenities like gyms, pools, playgrounds and common rooms and a focus on resident satisfaction and you have a recipe for increased demand at the top end of the multifamily market.
Learn More: Investor Advantages.
