The multifamily market has been an increasingly lucrative market since the very beginning of its existence. While other markets are still struggling to recover from the destruction of the COVID pandemic, multifamily is making a tremendous comeback. Although during the year 2020 the situation did not look as bright, marketers and property owners learned a couple of things about financial disaster since the last economic collapse and used the knowledge that they had gained in order to make a quick comeback from upwards of 25% drop in values and income that the year 2020 brought in.
Multifamily Transaction Market Stayed Strong
The demand for multifamily assets refused to give in during the onset of the H1 in 2020. Needless to say, an abundance of investors refrained from investing in the market due to the uncertain circumstances of the pandemic.
The transaction market was able to stay strong during that time because of the variants of types of investments that were happening in the market. Core properties and large deals were able to transpire through the use of mergers and acquisitions.
Some of the more aggressive players were equity-driven investors with insurance and pension fund experience that were in the process of adding to their portfolios. These types of people had a more abstract vision of how the investments could become successful in the midst of the crumbling economy.
Players from other countries began to see the potential and chose to look towards the multifamily market as well. Although the European market in the past has been known to stay within its country boundaries, some of those savvy investors in that area chose to peer over to our neck of the woods and get in on the action.
In the first half of the year 2020, it was extremely evident that many of the younger families that were in need of housing were more prone to rent than to buy. This substantial rise in demand for rental space fed the fires of investment passion and drew many strong investors into the market, ready for the huge returns that would most likely prevail from the transactions.
Europe’s Residential Transaction Volume 2020
During 2020 a group of major private investors in Europe that were established in housing companies, along with some funding managers found new ways to increase their market shares and expand their market segments. Some of the strategies that they put to use are:
- Internationalization. Many of the housing companies that are still active in their own markets have chosen to invest in larger portfolios that were made of foreign competitors for the purposes of global expansion.
- Market entry through project development and forward deals. Because there was a scarcity of available properties, many investors found themselves unable to get their fill of profit-creating properties. As a result, many of these investors found themselves seeking out forward deals and funding to further their plans.
- Direct purchasing and investment in developers.It’s starting to become a more and more normal occurrence for certain larger residential companies to enhance their own development capabilities by investing in development companies, as well as by increasing their land banking activities. Many of these companies have been able to find some level of success in these approaches.
- Fill the gap strategies and geographical diversification. Many investors that are actively watching the markets are also looking to expand the areas in which they serve. This typically has been taking the form of investing in multi-family properties outside of their usual core regions, but still in regions that have strong potential for socio-economic growth. The kinds of regions that these investors are typically looking at include places like college towns, as well as places between major cities. The biggest thing that these investors are looking for is indicators of growth.
Advantages to Multi-Family Property Investments
We’ve known for a very long time that multi-family properties are a strong investment, and one of the investments with the highest return on investment on average. Investing in multi-family properties is, overall, considered to be a financially sound move. But what are some of the real advantages that come with this kind of an investment? We already spoke shortly about the high return on investment, but let’s take a look at a couple of other things that multi-family properties bring to the table.
There is a huge amount of stability in the income streams created by this investment. People need a place to live, and as long as that’s the case there’s a good chance that you’ll be making money off of them. It doesn’t matter how good or bad the economy is doing, housing is something that is needed. On top of that, many people are motivated workers that have the money to pay the rent that you set.
Multi-family properties also bring a lot of diversification opportunities to your portfolio. You can easily buy or build anything from low-income properties to luxury high-rise apartments and still see returns from both. Sprucing up apartments can even ensure that your income stream is increased because the property will be worth more, so people will be willing to pay more to live in them.
Lastly, there are plenty of people out there doing all sorts of research about socio-economic trends, which gives you more ability to strike while the iron is hot in any given area. This market data allows you to stay on the ball and, sometimes, even move into a region before your competition has a chance to.
The Future of the Multi-Family Property Market
While no one knows exactly what will happen in the future, if things continue trending the way they have been, it looks like the multi-family property market will only get stronger and stronger. Many investors, both inexperienced and veteran, and starting to turn their eyes towards this market in hopes that they can increase their revenue streams with some lucrative properties in key regions. There are plenty of resources out there for investors so anyone that wants to get in definitely has enough information right at their fingertips.