Real estate has been an attractive investment for quite some time, and it is a common investment vehicle for both small and large investors. Of course, there is a rather large element of risk when investing in real estate, but this is true of most investment options. There are many ways individuals can add real estate to their investment portfolios, including buying rental property or engaging in real estate syndication. The latter option allows investors to participate directly in the ownership or financing of real estate projects without having to focus on the day-to-day activities involved in managing property.
For example, real estate investment trusts (REITs), which invest in and own various types of real estate, offer investors the opportunity to purchase shares on an open exchange or to invest in a mutual fund that concentrates on public real estate. Other real estate syndications include corporations, limited liability companies, or limited partnerships that establish, sell, buy, and operate real estate investments. These entities pool money from various investors to create a fund that can be utilized for a variety of real estate projects. Obviously, there are advantages and disadvantages to any investment and risk is inherent. In order to mitigate or prepare for the potential risk, a prospective investor must conduct due diligence to ensure the economic soundness of any investment decision.
Lately, the statistics regarding the real estate sector show that investing in the multifamily market is a sound decision likely to elicit solid returns. In general, a multifamily investment involves the purchase of an apartment complex or multifamily residence with five or more units. This sort of investment offers great cash flow potential because economies of scale reduce the expense of maintaining the property. Essentially, the expenses are spread out over the many units. In addition, in a multifamily building, the investor only has to manage and maintain one structure where all of the tenants are concentrated. This is easier and less expensive than taking care of many structures and many tenants dispersed in single-family homes scattered throughout a city.
According to the most recent analysis, rental apartment values are up 14% since the 2007 peak. Both rents and occupancy rates have been rising gradually across the nation as well. The average projected yield for multifamily investors is approximately 6% in most urban areas. And, this upward trajectory for the multifamily sector is not expected to slow down because the job market has continued to improve and demand for rentals remains strong. The demand for rentals is due, in part, to the persistence of restrictive mortgage lending. However, some of this demand can be attributed to the changing dynamics in the American labor market. People used to obtain a job and remain there for years, even decades. Nowadays, the workforce is far more transient. Thus, for individuals who only spend a year or two at a particular job or in a particular city it often makes more sense to rent. In general, young Americans are marrying, procreating, and settling into a home later in life. Regardless of the impetus for rental demand, there is no doubt that the current multifamily market is an attractive investment opportunity.
RE/MAX Paradise understands all facets of real estate investment, and we are experts on the Miami and Miami Beach real estate markets. No matter what your investment criteria and objectives may be, we have someone who can help.