If you want to make as much money as possible as a real estate investor, then it is helpful to time your investments well. There are some real estate investors who think that due to the recent banking crashes, and the ongoing rate hikes from the federal reserve that 2023 is not a good time to invest in multifamily real estate to generate rental income. However, 2023 could actually be a great time to invest in multifamily real estate, even if it will be your first time buying a multifamily property. In this article, we will go over some of the key reasons why this might be the case.
What are the Multifamily Trends for 2023?
According to Coldwell Banker Richard Ellis (CBRE), a large American real estate services and investment firm, the multifamily real estate industry is projected to perform above average in 2023. This firm believes that occupancy rates for rental units will remain above 95% and there will be 4% rent growth this year.
According to CBRE, the fundamentals are still very strong in the real estate market. Also, the company believes that many investors will be looking for ways to diversify away from other assets such as stocks, bonds, and cryptocurrencies, all of which have seen tremendous volatility in the past year. The ongoing war in Ukraine, the crises at several major banks including Silicon Valley Bank, Silvergate Bank, and Signature Bank have caused a tremendous amount of upheaval in the financial markets.
Even though the Federal Reserve initially said that it wasn’t going to bail out these banks, it did end up stepping in and guaranteeing deposits to make depositors whole. In doing so, the Federal Reserve printed tens of billions of dollars, thus undoing a lot of the benefits of the quantitative tightening it had been doing in order to get inflation under control in the last year.
In other words, a flight to stable assets is likely to be a strong trend for the rest of 2023, which could be very good for the multifamily real estate market.
7 Reasons to Invest in Multifamily Real Estate in 2023
1. It is a hedge against inflation
Despite the Federal Reserve raising interest rates consistently for the last year, inflation is still hovering around 6% according to the consumer price index (CPI). Investing in multifamily real estate can help you to stay protected from inflation.
For investors who are looking to reduce their exposure to questionable banks or volatile assets like stocks, bonds, and cryptos, multifamily rental properties are a great diversification option.
3. Low Single-Family Housing Sales
It is predicted that single-family housing sales could sink to their lowest level since 2011. There are a number of reasons why this could be the case. First, it is less appealing to many people to take out mortgages when the interest rates are significantly higher than they have been over the last few years. Second, home prices have also risen significantly higher in the last two years, which has priced many people out of the market. With home sales declining, many people will turn to multifamily real estate for their housing.
4. There is still a shortage of single-family homes
Despite the fact that home sales are slowing significantly, there is still an estimated shortage of 5.5 million single-family housing units in America. This serious shortage of supply will likely prevent single-family housing prices from falling. In other words, many people will still struggle to afford single-family homes and will thus keep renting or start renting as result, which means demand for multifamily housing will likely remain high and stable.
5. Multifamily real estate construction is at a 50-year high
The fact that multifamily construction is at a 50-year high means there is going to be an abundance of multifamily properties up for sale with plenty of new units coming on the market for the rest of 2023. Savvy real estate investors will take advantage of these opportunities. You could be one of them! The fact that there is a major shortage of single-family housing but that multifamily housing construction is in a major boom means that 2023 could be the perfect time to invest in multifamily real estate.
6. Safe haven during recessions
The collapse of a number of key financial institutions in the past few weeks has resulted in many people speculating that we could be about to enter a major recession. In addition to Silicon Valley Bank, Silvergate Bank, and Signature Bank being in murky waters, other major banks such as Credit Suisse and Deutsche Bank have been teetering also. If more large banks collapse or experience bank runs, we could be in for a major recession similar to that of 2008. During recessions, many people turn to real estate investing and multifamily property and as a safe haven. Multifamily real estate is an ideal safe haven asset for uncertain times such as these.
7. Cash Flow
The great thing about multifamily real estate is that no matter what is happening with the global economy, they continue to churn out cash flow month in and month out. Having a reliable source of cash flow is even more difficult during difficult periods such as pandemics or recessions. So, investors can strengthen their financial positions by boosting their cash flow through multifamily real estate investments.
Despite the fact that there is a lot of turbulence in the financial system right now and that we might be about to enter a recession, 2023 could still be a fantastic year for multifamily real estate investing. The massive shortage of single-family homes will essentially guarantee high demand, and the abundance of multifamily real estate that is being built right now means that there will be plenty of opportunity for investors.
So, don’t wait if you are thinking about investing in real estate if you don’t want to miss out on the favorable conditions that exist right now in the market. Investing in multifamily real estate is not just a matter of making money, it is also a matter of preserving wealth. Leaving money in dollars exposes you to the downsides of inflation. Leaving money in banks exposes you to bank failures. Leaving money stocks and cryptos exposes you to volatility. So, why not add a little more financial stability to your portfolio in the form of multifamily real estate?