Everyone tends to agree that real estate is a great asset class to have as part of your portfolio. In fact, much of the wealth of America is based on real estate investments, and this continues to be the case despite the pandemic.
But not all real estate is created equal. As with any investing strategy, a balanced portfolio is probably the right strategy. However, certain types of real estate investments tend to outperform others. Multi-Family is one of these.
What’s the deal with Multi-Family?
We believe some fundamentals make Multi-Family an excellent asset class. You can also leverage the investment from 75% debt to 25% equity. Many lending institutions love the asset class, debt isn’t hard to come by, and rates are low.
Through this pandemic, while all real estate has taken a hit, multi-family has shown to be incredibly resistant to market fluctuations. Rent collections did reduce for some months but nothing like office or retail. The National Multi-Family Housing Council reports that 80.4% of apartment households paid rent as of March 6th, 2021.
The following chart compares rent paid from September 2019 to February 2021:
As you can see from the above, Multi-Family has performed well.
Let’s also not forget that people need a place to live. That has always been and will continue to be the case. With rising house prices across the country, the demand for apartments is up. The National Apartment Association reported a shortfall of apartment units; an additional 4.6 million are needed by 2030. That’s a considerable number, and it places more value on investing in existing assets and renovating them to meet market demand.
On top of all this, Millennial love apartments and like the flexibility they provide. Baby boomers are also hungry for Multi-Family to downsize and to be able to move around with their family while not having to worry about ongoing house maintenance.
We love the fundamentals of Multi-Family, which is why we focus on it with the CalTier Portfolio Fund.