Hot Markets in the Multi-Family Lending Industry

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In 2020, more than 43 million households were tenants, an illustration of the long-term upward trend of renters that began in the mid-1970’s. The multifamily marketplace composes approximately 15% of the entire existing housing supply. There has been a corresponding collective decrease in the residential vacancy rate, declining from 39.6% in 2010 to the present mark of 6.4%. All vacancies are not the same, however, as became apparent in the midst of the COVID-19 pandemic—during which there was a significant shift in tenant behavior as individuals moved away from crowded urban areas to the suburbs seeking more square footage for their budget. As suggested by numerous studies in supply-demand contexts, reduced supply levels in housing translates to increased rents. Per the Yardi Matrix’s Multifamily National Report, multifamily rents increased over 1.5% year over year in April 2021, the biggest jump in the market since the initial months of the coronavirus pandemic.

During the onset of the COVID-19 crisis, as total economic sectors were shuttered overnight and unemployment rose at unprecedented rates, there was understandably a high degree of concern regarding the future performance of the multifamily market. If tenants could not pay their rent, landlords may be unable to subsequently pay the balance on their mortgages. Government stimulus initiatives assisted in temporarily stabilizing the multifamily space by offering fiscal and monetary support and instituting moratoriums on evictions to offer relief to financially burdened tenants. This led to rent collections never dipping below 93% throughout 2020—meaning the multifamily industry weathered the 2020 recession much better when compared to other property sectors.

Looking forward to the coming months and beyond, the general forecast for multifamily investing is encouraging. Due to ideal target tenant demographics, historically reduced interest rates and an uptick in single-family values that are essentially pricing out a significant percentage of potential homebuyers, CBRE predicted there would be a “return to pre-COVID vacancy levels and a 6% increase in net effective rents next year, with a full market recovery occurring in early 2022.” CBRE justified this projection by pointing to the increasing demand for multifamily housing options that will continue to be fueled by the “unbundling” phenomena, in which tenants will be increasingly moving out of their parents’ residences with new employment opportunities offering the option to telework and reside where they please.

With over 30% of the entire United States population comprised of renters, there are a multitude of prospective investment opportunities across the country. The following are some of the most promising local markets for real estate investors to concentrate their multifamily investment efforts where you can utilize a flexible private money loan from Alpha Funding to diversify your portfolio and lock-in a revenue-generating asset.

NAPLES, FL

With a median property price of around $375,000 and an average monthly rental income of nearly $3,300, the community of Naples, Florida is an ideal market for investors. The cap rate is a promising 8.6%, a strong indicator of consistently high return on investment.

SAN ANTONIO, TX

With solid job growth and a consistently increasing median income plus its role as host to Lackland Airforce Base that employs more than 25,000 individuals while stimulating the local economy, San Antonio is the perfect spot to invest in multifamily real estate.

PARADISE, CA

Located in idyllic Butte County with boundless opportunities for recreation in addition to sought-after urban amenities, the town of Paradise is a literal paradise from the perspective of multifamily real estate investors looking to optimize their profit margin. The community’s rent yields increased by 7% over the past year and tenant wages increased 9%–signaling that landlord’s profit margins will remain consistent well into the future.

Alpha Funding Partners is a private money lender who loves lending on multi-family loans! Let us help you get access to fast funding. When you partner with Alpha, not only do you get capital, you also get a team of experts who will work with you every step of the way.

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