When you think of housing, single-family homes typically come to mind. However, a type of housing that is often overlooked is multifamily real estate. For most real estate investors, multifamily housing investment is a great way to generate passive income.
Housing that accommodates multiple properties at once is referred to as multifamily housing. According to a 2019 American Housing Survey and the US Census Bureau survey, roughly 43.9 million homes, or 31.4% of all US housing, are multifamily.
There are different types of multifamily housing like apartments, condominiums, townhomes, and mixed-use development. Although not as prevalent as single-family homes, multi-family residences represent a significant portion of the residential real estate market in the US.
During the 2008 recession, multifamily housing took a hit, and its value plummeted. Luckily, things rebounded quite nicely between 2012 and 2022 when multifamily housing became such a favorite for investors that values reached an all-time high. Multifamily lending surpassed 487 billion dollars in 2021 and accounted for 42 percent of the commercial lending US market.
This trend is due to the lower level of risk associated with investing in a multifamily property relative to other commercial real estate options; largely because of the essential role it plays in their local communities.
If you want to invest in multifamily property, specifically for rent, you should be aware of the many benefits that it can provide to both investors and the community. Let’s talk about it in detail!
What is Multifamily Housing?
Any residential real estate that permits the simultaneous occupancy of two or more households is multifamily housing. Unlike single-family arrangements where just one family resides in a single property, multifamily property can range from smaller apartment buildings with just a few units to complexes with hundreds of apartments.
Instead of being owner occupied by the owner, for rent multifamily housing is rented to tenants generally for short-term periods ranging from 1 to 12 months. They often share floors, walls, occasionally utilities, parking spaces, and common areas like playgrounds and greenspace with their neighbors.
Benefits of Multifamily Housing for Investors and Their Communities
There are numerous benefits of investing in multi-family housing, including:
1. Multifamily housing helps reduce the amount of land needed for housing. It is because high-density housing, such as apartments, can accommodate more people per square foot than low-density housing, such as single-family detached homes.
2. Multifamily housing also has several environmental benefits. For example, it can help reduce the amount of energy and water consumption.
3. Multifamily housing helps to reduce traffic congestion and pollution.
4. Another essential benefit of multifamily housing is that it can help to create a sense of community. People who live close to each other are more likely to interact and form relationships.
The Benefits of Multifamily Housing for Their Communities Include:
1. Multifamily housing’s key advantage is that it’s typically more affordable than single-family housing. People who cannot afford to purchase can rent and further, there are subsidized housing programs available to low-income families in multifamily projects.
2. Multifamily housing is at lower risk for tenants. It costs them less per month and they are not locked into having to deal with all the things that go along with home ownership such as paying property taxes, getting hazard insurance, and being obligated to a large mortgage.
3. Multifamily housing tenants do not have to deal with maintenance.
4. With fewer people involved, problems or disagreements can be resolved quickly in multi-family housing.
How can Multifamily Housing Help Improve the Quality of Life for Residents?
Humans aren’t supposed to be solitary all the time. We are social beings, and engaging with others as valuable members of a multi-family housing community is beneficial to mental health.
Support and Safety
Living in a community helps foster a sense of belongingness and safety. From students to seniors, multifamily housing allows for safety by living surrounded by others rather.
Sense of Belonging
Being a part of a larger whole is fundamental to human experience, and it can even help give our lives purpose. When living in multifamily housing, we realize that we are not alone and feel valued when we find people who share our beliefs, interests, and worldviews. Belonging emphasizes the importance of community since it strengthens our sense of self and enables us to deal with difficult situations and emotions.
Multifamily housing promotes community living and sharing. Sharing experiences, thoughts, and emotions improves our sense of self and the community. Sharing is caring!
Role of the Government in Supporting Multifamily Housing
The US government is taking initiatives to support multifamily housing. For instance, in the United States, one of the federal initiatives targeted at supporting rental housing for low- and moderate-income families is the government’s backing of the multifamily mortgage market.
The Federal Housing Administration (FHA), the Rural Housing Service (RHS), and Fannie Mae and Freddie Mac—the two significant GSEs that have been functioning under federal control since 2008—all provide mortgage accessibility for investors. Particularly during times of stress, these programs aid in bringing liquidity and stability to the market which maintains the ability of investors to create multifamily housing.
multifamily housing: Conclusion
The purpose of investing in multifamily housing is to make money but with it comes the responsibility to maintain and operate to ensure your investment offers Tenants what they are looking for which will put your units in high demand. Partnering with a property management firm helps reduce the responsibility for managing and maintaining a property.
To enjoy all the benefits of multifamily housing investment, partner with us. If you are looking for property management companies that will make multifamily housing investing easier, consider Summerfield!
We employ tried and tested strategies to ensure that your multifamily housing turns out to be a wise real estate investment. You can learn more about our approach by scheduling a call with us!
Multifamily Housing: FAQs
Q: What are the Benefits of Investing in Multifamily Housing?
A: Owning properties with multiple units gives you the ability to scale the size of your rental property portfolio, access better financing options, and have property managers take care of your property.
Q: What is the Definition of a Multifamily Property?
A: Any residential property with more than one housing unit is referred to as multifamily housing.
Q: Where are Multifamily Properties Most Common?
A: With Pennsylvania experiencing a staggering 195% growth, the Northeast has the highest concentration of multifamily housing. However, low-density locations like New Mexico and Kentucky have a decent concentration of multifamily housing so you will find it in urban cities in all states.