Why do we focus on multifamily real estate?

Over the past 25 years, multifamily investments have had the highest average returns of any commercial real estate asset class.

Investing in multifamily projects has several key advantages, such as greater resilience to crises, a steady stream of passive income, lower risk, and the opportunity to scale your portfolio.

01

Predictable Cash Flow

Investors like multifamily properties because they generate cash flow each month. Rents are predictable, and units can be released to ensure steady cash flow year in and year out.

For more information: Why should you invest in multifamily properties

02

High Demand

Class A, B and C multifamily occupancy are above 97%, well above any year since the 1980s. While occupancy rates will likely fall as new properties come on the market, occupancy is expected to continue at historically high levels (95%-96%) over the next five years.

For more information: The Boom in U.S. Multifamily Housing

03

Lack of Supply

The United States is currently experiencing one of the largest housing shortages it has faced in the past 45 years. This shortage is due to many reasons, including a lack of construction labor, supply chain problems and the still looming ramifications of the Great Recession of a decade ago. It is estimated that there is a shortfall of 6m units and that it will take 20 years to close that gap.

For more information: The latest trends

04

Outperforms Inflation

Real estate assets far outperform other traditional asset classes in times of inflation because: they are a tangible asset, they generate passive income that is adjusted for inflation, and they are leveraged.

For more information: Inflation protection

05

Asymmetric returns

The graph shows the 10-year risk-adjusted return. Stocks have a return of 11.98% with a volatility of 12.26%. Bonds have a low return and low volatility of 3.75% and 3.54% respectively. Private real estate has high returns of 10.17% with a volatility of 2.98%. Stocks and bonds have a symmetrical risk-return relationship, while real estate is asymmetrical.

For more information: Volatility Protection

Types of Investment Strategies

In addition to having several choices of “products,” commercial real estate investors have several strategy options.

Equity investment strategies for commercial real estate can be broadly categorized as core, core-plus, value-add, and opportunistic.

Different real estate classes offer unique opportunities and risks which impact the levels of return. Infinity’s investment team conducts an in-depth analysis of each investment opportunity to determine which investment strategy to adopt to maximize returns and minimize risk.

These are the four types of real estate investment strategies that investors adopt on a case-by-case basis:

Multifamily Property Types

“Multifamily” is referred to as a single type of real estate asset class, but the sector is very large and offers a variety of asset types available for investment.

Class A

A core asset that is either newly constructed or fully renovated, located in a good area with high-end amenities, finishes, and fixtures.

Class B

A core asset that is slightly inferior to a Class A asset with a less preferable location, basic finishes and fixtures, and deferred maintenance.

Class C

Generally, a lower grade asset due to inferior age and/or location with lower-end amenities, finishes, and fixtures.

Workforce Housing

Workforce or affordable housing is quality housing in reasonable proximity to the workplace.

Senior Housing

Senior housing is a multi-residence housing facility intended for the elderly. Typically, each person  has an apartment-style room or suite.

Student Housing

A building primarily providing sleeping and residential quarters for large numbers of students.

Multifamily Market Size

Investing in rental properties is an excellent way to generate a steady source of monthly income alongside long-term portfolio appreciation and growth.

Multifamily housing complexes are very common in the United States, particularly in urban areas. The sector includes 14.5 million units across 62 metropolitan markets with a population of over 1 million people.

The total value of U.S. multifamily rental properties is over $3.3 trillion, making it one of the most attractive sectors for investors both domestically and internationally.

Source: CBRE U.S. Multifamily Housing

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