Is the market for multifamily product overpriced?


From the ages of 19-21, I bought three houses. They were what I considered multifamily properties, each with two to three units. 

And I lost everything. 

Thinking I was being smart by investing in real estate, I quickly learned the hard way that I went about everything the wrong way. 

I still believe investing in multifamily real estate is the smartest investment.

Right now, I am reinvesting all of the money I make back into my businesses. But my goal is to one day have a chunk of money that I can invest in multifamily properties. 

In Q1 of 2019, investment sales for multifamily properties rose 1.3% from last year to $36.4 billion, according to the United States Multifamily Capital Markets Report by Newmark Knight Frank. Multifamily properties continue to have the highest sales volume of all property types for the past two years. 

What type of multifamily?

When I talk about multifamily investment, I am not talking about duplexes, triplexes, or quads. Large commercial complexes with 40 or more units make the best investment. 

Larger complexes allow for a property manager to be hired full-time. They will also continue to bring in money each month, even when some units are not rented out. If a tenant moves out of a duplex and you cannot find a new one for three months, that causes financial stress.

Will people continue to rent?

In the last seven years, we have seen multifamilies skyrocket because we have extremely low interest rates and a high percentage of people who are still renting. 

This trend of a high percentage of renters will continue for a lot of reasons. We are seeing that even the low interest rates are not enough to turn people into buyers. Baby boomers are in a massive transitional time, many of whom will rent for a couple of years. In addition, millennials are continuing to rent, waiting until later in life to transition to homeownership. 

Baby boomers and millennials both want the same thing - location. People want easy access and walkability. Instead of high taxes and HOA fees people want to pay one bill for their rent each month and have a beautiful place to live. 

When investing in real estate, location is still the golden rule. Multifamily complexes in desirable locations are not overpriced. It continues to be one of the best investments to build wealth.

For more on this topic, and some answers to additional questions, watch this video.