The past two years and the ongoing commercial real estate crisis have given real estate investing a bad name. While this is not surprising, there is one class of real estate that should be front and center will all investors as the new decade dawns. Failing to do so will cost investors significant returns in the coming years.

Prior to the recession a number of trends supported the idea that multifamily as the right investment choice. Some of the factors behind this include:

  • Minorities will be 72% of all new households during this decade. More than half of minorities rent.
  • Of the minority proportion fully half will be Hispanic which rent even more than other minority groups.
  • Seniors rent more heavily than younger Americans. 74 million baby boomers will reach senior status over the next 15 years.
  • Housing costs were precluding more and more younger consumers from buying.
  • Echo boomers are just coming of age. The heaviest percentage of renters are between 18 years of age and 35 years of age.

These factors alone forecast the healthiest rental housing market seen in the United States since prior to the 1970s.

The housing crisis and resulting "Great Recession" adds to this condition. The key underlying factors driving this additive situation are:

  • Down payment standards are sharply higher;
  • Bank lending for homes is constrained;
  • Credit requirements are sharply higher;
  • Faith in the home as a safe invested is eroded;
  • Consumers are focused on saving; and
  • Construction capital for homes is restricted

These factors are bound to apply pressure on rental demand. However, add to this consumer attitudes and the industry is headed for the perfect storm to drive demand. We estimate that for the next few years there will be a shortfall of construction in the neighborhood of 400,000 rental households per year very rapidly pulling all vacancy slack out of the market.

On top of this, the rise of the emerging economies is driving construction costs upward which will drive even more households out of the single family market as the drive for savings and need for reasonable cost makes rental housing more desirable. Further, this trend will be even better for older properties that can add units on existing acreage.

Summarizing, investors without a multifamily strategy are likely missing one of the best investment opportunities of the new decade.

Blake Ratcliff works to improve multifamily investment decision making by focusing on due diligence of the targeted apartment investment. Sign up for our services and products at http://multifamilyduediligence.wordpress.com/multifamily-investment-due-diligence-services/ to increase your profits or check out our blog at http://multifamilyduediligence.wordpress.com/ to learn more.

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