The investment outlook for multifamily properties in 2023 is looking great as steady occupancy and high rents give landlords of multifamily properties a reason to be excited about 2023.
Multifamily investing involves the purchasing of properties with rentable housing units. In these types of investments, a group of investors often work together to mitigate costs, split profit shares, and reduce an individual’s risk. When investing in multifamily properties is managed properly, it can generate steady and reliable income streams in all economic cycles.
Multifamily properties include apartment complexes, multi-unit buildings such as duplexes, tri and four-plexes, among other property types. These are being snapped up by investors and renters alike. Last year, real estate and rental rates skyrocketed. The annual 20% increase for single-family homes has put dreams of homeownership out of reach for many. As flocks of would-be homebuyers turned to renting, affordable multifamily properties were in short supply. Thanks to the rising demand, rent climbed at least 10% in 65 of 150 large cities.
One big advantage to multi-unit properties over single-family homes is that one vacancy won’t tank your cash flow. For instance, if you have a four-plex, if one unit is open, you still have three other units giving you income. Also, loans on up to four-unit properties still qualify for conventional financing, unlike larger properties that fall under commercial financing.
Additionally, increased rent did not slow the steady stream of renters. In fact, the National Apartment Association found that the US occupancy rate rose to 96.5%, exceeding the 2000’s record high. Basically, people are paying higher rents and staying in their apartments longer.
What does all this mean for you as an investor purchasing rental properties? For starters, the expanding pool of renters means low vacancy rates. Renters pounce on affordable units as soon as they open, and a steady stream of renters leads to stable cash flow. In the past, multifamily investors learned to anticipate months of vacancy in their budgets, but in 2023, the risk for that hazard remains low.
Remember, increasing interest rates are driving renters to your door, but as an investor, they impact you as well. If you purchased investment properties with variable mortgages, prepare to account for those rates in your annual budget. In addition, if you are looking for properties, those rising interest rates make bargains in the multifamily market far more difficult to find. Deals will still be out there in 2023, but you’ll either need to do some digging to find them or you’ll need to refinance.
Investing in multifamily properties in 2023
The fastest and easiest way to jump in 2023’s income-producing investment trends is through real estate investment funds like Ruthian. We provide a path for you to contribute capital toward multifamily properties without requiring you to manage them. As an investor, you can reap the rewards while putting in far less time and money.
Managing properties can be a full-time job. You are responsible for maintenance and upkeep on all the units you rent. Either you will do the plumbing, electrical and repair work yourself or you’ll have to find a trustworthy company to do them for you. Investing in rental properties through Ruthian allows you to put those potential headaches into someone else’s hands.
Ruthian also allows you to get into the real estate game with less of an upfront investment and individual risk. Multifamily properties are a good value over time, but pricey to acquire. Duplexes cost as much or more than a single-family home, and you’ll need a 20% down payment on hand.
The economy and real estate market has been notoriously tricky to predict, but all signs point to a good year for multifamily investments. While experts say home prices and rent will continue to rise, they predict a slower climb over the next 12 months. Mortgage interest rates probably won’t climb but will remain high, locking out first-time home buyers for another year.
The combination of steady occupancy and high rents gives landlords of multifamily properties a reason to look forward to 2023. In the short term, your investment has the potential to be a great source of passive income. In the long term, it will likely continue to appreciate as other investors scramble to get in on the trend.
To learn more about the Ruthian Investment Fund, contact us at invest@ruthianllc.com.