Since the global economic impact of the COVID-19 crisis, investors have been looking for ways to protect their assets. Many are spinning around in circles, wondering if it’s time to sell, hold, or search for new opportunities. If you have a surplus of cash, you may be looking to purchase assets below value and hold them until the economy stabilizes. Multifamily investing is a great way to do this.
Investors and analysts are unable to pinpoint the exact duration of the 2020 recession. There’s no way to know when it will end since the novel coronavirus is so unpredictable. Though we wish to stay optimistic, it seems that the global economy continues to suffer daily. Businesses are shutting down, and the financial world is entering panic mode.
However, recessions have come and gone in the past, and it’s important to analyze the data to see the bigger picture. It’s normal for stocks to drop, businesses to lose money, and for the world to be uncertain. Since the start of 2020, finding a dependable tenant has become increasingly difficult for those who own properties.
There is a silver lining. The recession has increased the demand for multifamily housing. During a recession, people are more likely to rent than buy. Investing in a multifamily property can be a lucrative decision during a time like this. In this post, we will cover how multifamily investing may be the best opportunity for investors with spare cash to capitalize on the 2020 recession.
Multifamily Investing Overview
When most people think about real estate investing, they think of single-family homes. That’s because the dream is to own a house and hopefully flip it for a large profit. Real estate investors often overlook multifamily properties, but they are one of the best ways to boost cash flow. This is mostly because multifamily properties have a lower vacancy rate than single-family homes.
Here are some examples of multifamily housing units:
- Condos/apartments
- Townhouses
- Duplexes
However, just like investing in single-family homes, multifamily housing units come with their own set of challenges. You’ll need to do a lot of research before deciding to invest.
What’s Causing The Multifamily Home Market To Climb?
In simple terms, the demand for multifamily homes is growing. Younger members of the workforce are moving into big cities, and buying a home has become more difficult in recent years. During a recession, most people don’t have the purchasing power to buy a house, so renting is the only option.
From an investment standpoint, investing in multifamily housing units is favorable due to their higher monthly income rate and low maintenance cost. Currently, multifamily homes are easier to sell due to the increasing demand. So if you’re looking to liquidate, you’ll probably find yourself with a solid profit margin.
There’s no way to tell where the market will go once the economy recovers, but it’s strongly believed that we will still see a steady increase in the value of multifamily homes across the country.
Why Multifamily Investing?
Other than the increasing demand during the 2020 recession, investing in multifamily housing units has its own evergreen benefits. Here are the main benefits of multifamily investing:
More Cash Flow
When you buy a single-family home, you’re collecting rental income from a single source. By investing in a multifamily home, you can collect from multiple tenants. This is a huge boost in cash flow since you’re not depending on one rental payment each month. You can also use your property to house yourself and other tenants. Multifamily investing is a great way to build up a passive income stream that pays your bills and gives you a cash surplus each month.
Less Risk
Multifamily investing can be far less risky than investing in a single-family home. That’s because you can house multiple tenants in one property. Similar to the cash flow benefit mentioned above, multifamily homes diversify your monthly income source. If one tenant decides to move out, you can still collect money from the remaining tenants in your unit.
Easier To Scale
Multifamily houses are much easier to scale than single-family homes. That’s because you can purchase multiple assets at once. This allows your investment to grow faster and gives you the freedom to invest more. Many real estate investors see the biggest gains in their portfolio after investing in a multifamily housing unit.
Conclusion
There’s no way to know where this recession will take us. One of the best things you can do to protect your assets is to look for ways to diversify your portfolio while eliminating risk. Multifamily investing isn’t for everyone, but if you’re looking for a potentially lucrative investment during these times, it may be perfect for you.
