The signs all point to an excellent opportunity for investment in multifamily rental properties. But while the overall outlook may be favorable, it’s important to dig a bit deeper to find the most profitable properties for long-term investment. Here are five things to consider before you make a decision:
A growing market. Who are the renters? Working-class individuals have traditionally been a mainstay of apartment living, but we now have to consider the millennial generation, consisting of 85 million U.S. citizens born between 1977 and 1996. Whether due to student debt or the delay in starting a family, this large segment of the population is a big factor in the increasing demand for apartments nationwide.
Investing in a new complex. In response to the growing number of people who prefer to rent rather than buy a home, new, shiny apartment communities are being built in cities across the nation. However, a survey done by RealPage found that retention rates for these upscale buildings tend to be low, with less than half of the tenants opting to stay when their lease expires. Such turnover results in high expenditures for marketing and unit make-ready in order to attract new tenants. In short, net operating income is low if vacancies are high.