Real Estate Investment Options and Basic Human Needs
Published on: Friday, December 18th, 2015
Why You Need to Consider Multifamily Real Estate Investment Properties.
When comparing different real estate investment options, it is important to look at key factors in addition to just the income they produce and the purchase price. When looking at different real estate investment options, our team likes to invest in properties that fill a profoundly necessary need that will always be in demand, and that need is shelter.
Commercial real estate properties containing businesses (retail and office) have been declining every year. Businesses continue to have a variety of options available to them for locating their businesses. Their businesses can be located in an office building or in the basement of a home, or they can even use technology to make their businesses virtual, requiring a minimum of space. Businesses can store files in a warehouse, in the cloud, or on a thumb drive. They can stockpile large inventories or stay lean and order as needed. It is all reflected in the cost to run the business and affects the amount of space they need. My wife’s employer is based in Texas and over 50% of their employees work from home, and connecting online. The internet has created less demand for retail space as consumers no longer have to rely on companies down the road to purchase goods and services. They now have virtual stores they can shop from and have their purchases delivered right to their doors diminishing the need for retail space. Companies are always scrutinizing the use of real estate and facilities as a way of improving the bottom line.
Contrast that with a multifamily, income-producing real estate investment option. First, everyone needs shelter. Second, the demand for apartments is increasing as people live longer. The tightening of the financial industry makes it harder for people to qualify for home loans, and harder to get financing for new apartment communities to be built resulting in a lack of new inventory coming on the market. As the economy continues to struggle, and home prices continue to fall, the single family housing investment market is not the ideal place for investors to turn. Apartments are the main backup plan for many people in uncertain times. College students, immigrants, job transfers, and people suffering financial difficulties turn to apartments as an economical housing choice. The critical role of apartments is a feature not duplicated by commercial real estate or single family homes, and it cannot by replaced by technology as office and retail can be.
Once the type of real estate investment option has been decided on, it is important to look at other factors of your investment as well. Our team focuses on additional factors such as market cycles, identifying growth areas, appreciation potential and key characteristics of successful multifamily properties such as each property’s tenant base, property condition, unit mix, and amenities, to name a few. This keeps us from investing in weak markets or under-performing properties while solidifying great investment cash flow with strong appreciation potential.
By looking at real estate investment property tenant demand, market factors and basic human needs, one could easily conclude that multifamily can be an excellent real estate investment option that will always have demand, unlike other commercial properties. I believe multifamily properties should be considered by all investors as they look at their real estate investment options and diversification needs.