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 even through the pandemic.
But not all real estate is created equal. As with any investing strategy, a balanced portfolio is probably the right strategy, however, there are certain types of real estate investments that tend to out perform others. Multi-Family is one of these.
What's the deal with Multi-Family?
There are some fundamentals that we believe make Multi-Family a very solid asset class. Not least, you can leverage the investment 75% debt to 25% equity. A lot of 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 the market fluctuations. Obviously rent collections did reduce for some months but nothing like office or retail. In fact, 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 actually performed well.
Let's also not forgot that people simply need a place to live. That has always been and will continue to be the case. With rising house prices pretty much across the country, the demand for apartments is up. In fact, the National Apartment Association reported that there is a shortfall of apartment units and additional 4.6 million are needed by 2030. That's a huge number and it places more value on investing into existing assets and renovating them to meet market demand.
On top of all this, Millennial's 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 whilst not having to worry about ongoing house maintenance.
All in all, we love the fundamentals of Multi-Family and it's why we focus on it with the CalTier Portfolio Fund.