Residential Foreclosures are Up
When an investor looks at opportunity there are always direct and indirect reasons to invest in real estate. Because residential foreclosures and short sales are high now many investors are flocking to try to purchase residential properties. Many of them are looking to rehab and flip them for immediate return. Other more capitalized and savvy investors are looking to buy and hold them for the market to come back. Both of these strategies can work but they have inherent pitfalls built in. Both directly and indirectly now is the time for savvy real estate investors to invest in multifamily housing.
- The residential market is bad, therefore financing is much tougher for investors.
- The residential market is bad, therefore financing is much tougher for the home buyer.
- The residential market is bad, therefore the market is flooded with troubled properties being sold below market.
- The residential market is bad!
Rental Properties are in Great Demand
Where are these homeowners moving to who lose their homes. The vast majority of them are moving into apartments. In general, they will not qualify for home financing again for at least four years. Many will never buy homes again. The delinquency rate at Fannie Mae (by far the nations largest owner of single family home mortgages) is over 5% and expected to continue if not get sore over the next 2 years, where will these people move to? During the housing boom new starts of multifamily units were well below their normal level. So now there is a shortage of apartment buildings looming as the housing crises continues. This means high occupancy and increasing rents for the savvy investor. This is a great time to invest in multifamily housing now.
Apartment Financing is Available
Although the guidelines are tougher financing for multifamily residential rental units is available and rates are very low. Whether an investor is looking to purchase, build, renewate or refinance there are many options available today. With fixed rates in the 5% to 6% range for larger buildings and slightly higher for smaller properties now is the time for investors to seriously consider commercial real estate for their investment portfolio, especially if they are thinking long-term.
Return on Investment
The most important reason investors invest is for a return on their investment. Investors all have varying degree of risk and no investment is without risk. But, the return on commercial real estate can be measure in two ways; income and appreciation.
- Income, rental units are in high demand and that means high occupancy and higher rents.
- Appreciation, values have gone down on apartment buildings like residential real estate during the housing crises yet rents are not significantly down and occupancy is up. Both occupancy and rental rates will increase. The more money a property makes the more it is worth.
- Values are low, income is stable and growing, appreciation is very likely as the shortage of commercial apartment buildings continues.
Invest now in multifamily housing.