All residential mortgage lenders have tightened their standards; fewer people can qualify for home loans today. Consequently, the multi-family (apartment buildings) sector of the commercial real estate industry is booming. Nearly 15% of all Americans now live in rented housing and that number is projected to grow.
Many smart real estate investors are thinking about entering the apartment building market or, if they already own apartments, expanding their rental portfolio. There are several hot categories of apartment units, each with much opportunity for profit.
Standard – Market Rate Multi-family
Small families, baby boomers and the new “echo boomer” generation are fueling tremendous growth in the multi-family, rental housing. There is a growing demographic in America that has consciously deferred the American dream of home ownership and prefers the lower maintenance apartment lifestyle. Even today in the middle of a “credit crunch” leased-up apartment buildings are fairly easy to get financed. Lenders are also willing to fund well thought-out apartment rehab projects in growing or developed areas.
Affordable Rental Housing
Without doubt affordable apartments are in the greatest demand in the entire multi-family sector. The lower income population has the least options when it comes to housing. Many simply must rent. The opportunity in affordable units is tremendous but I don’t recommend it for the beginner or those looking for an easy buck. The regulation, tax credit laws and Federal as-well-as State oversight make this category of commercial real estate among the most cumbersome. Getting a mortgage loan for affordable housing is complex and difficult but it can be accomplished if investors work with specialists in that market segment.
Life expectancies continue to rise and the baby boom generation is getting older at a rapid pace. The demand for senior rental housing is strong and fast growing. Developers are building assisted living facilities, independent living facilities, skilled nursing facilities and even apartments specifically for seniors with various forms of dementia, such-as Alzheimer’s. Real estate investors with the ability to team up with knowledgeable elder care specialists will find their projects enthusiastically embraced by renters and the financial community.
College enrollment rates are strong (especially among females) and are projected to grow by double digit percentage rates over the next several years. Investing in student housing can be very profitable and is an exciting and expanding market. Students are easy to please. They want an reasonable rent, a central location and to be near their friends. But, keep-in-mind, it is very often the parents who pay the bills. Parents want safety and security for their kids more than anything else. Apartment investors who can find a way to please both the student and the parent will never lack for positive cash flow, and positive cash-flow is the key to getting a commercial mortgage application approved.
After years of great expansion, the economy is slowing, there is no denying that. However, weaknesses in home sales and residential lending have created a boom in the apartment sector. After all, people have to live somewhere. Now may be the time to enter the multi-family market or to acquire more apartment buildings. Mortgage lenders love rental income and will approve and fund apartment houses faster than any other type of property. High, sustainable income is available to the savvy apartment investor.