Multifamily is safe, steady investment opportunity

//January 13, 2016

Multifamily is safe, steady investment opportunity

//January 13, 2016

Like market-rate multifamily housing, it provides a very stable and steady cash flow. The stability of it creates great interest from lenders and provides favorable financing terms.

Student housing has evolved over the years and now sits as the second or third reason a student, and student’s parents, decide on a college or university.

Other factors that play a role in student housing:

  • Stability of the school: Seasoned investors look for schools with large student enrollment, and growing student populations are required.
  • School’s residency requirements: Are changes expected?
  • School’s ownership: Do they own the housing? Are they planning to develop?
  • School’s relationship with owners/developers: Is it public or private?
  • Development location: Is it at a superior location relative to the subject property?

Our recent representation in the acquisition of the Bard Townhomes is a perfect example of a good and stable investment. There are 173 townhomes, totaling 458 student housing beds, within walking distance to Shippensburg University.

Our client had an immediate need. They were offered an above-market price for an income-producing asset in their portfolio.

Inclined to take the offer, they looked to us to find a suitable replacement investment. We were able to locate this particular, off-market transaction in the allotted time frame to fulfill the 1031 exchange rules.

This asset provided diversification to our client’s investment portfolio by providing a stable and reliable return for their 1031 exchange.

Unlike other commercial real estate investment properties, multifamily and its sub-asset class may offer investors a bigger bang for their buck. While risk is always a factor with any investment, demand for multifamily rentals are not impacted in the same manner traditional investments fare.

Business closures and market shifts can directly impact industrial and office, respectively. We have collected and monitored data impacting the multifamily market for 10 years. In the last four years, we have sold over $145 million in apartment and investment transactions.

There continues to be more multifamily investment opportunities coming online in the midstate. We find them on a daily basis.

Our recently published Central Pennsylvania apartment vacancy report studies vacancies in type A, B and C class apartment communities, which includes student housing, in the five counties that make up the central region.

The multifamily sector saw a leveling out of the typically high rent and occupancy growth trend. This is mainly due to the new construction units being absorbed into the market. We should continue to see leveling out of growth rates.

However, multifamily housing will continue to be a safe asset class to own. These typically offer high returns on investment, with low risk, making them ideal acquisitions for a 1031 exchange. The full vacancy report can be viewed here.

Drew Bobincheck and Chuck Heller are commercial real estate agents at Landmark Commercial Realty Inc.