Navigating the Storm: How Multifamily Real Estate Remains a Beacon of Stability
"Fasten your seatbelts; we're in for a bumpy ride." - The turbulence of an impending recession looms, rattling markets and sending interest rates sky-high in a frantic attempt to curb the monstrous inflation rates unseen since the early '80s. Even Meta, formerly known as Facebook, slashed over 11,000 jobs in a single swoop. Prognosticators like Ned Davis Research assert that a 98.1% chance of a global recession is knocking on our door.
The financial tempest roars, but fear not, intrepid investor! For those navigating the stormy seas of multifamily real estate, there's a lighthouse of reassurance shining on the horizon.
Why does the multifamily sector offer smooth sailing? Several factors keep the multifamily ship steady, ensuring investors can weather the storm.
Inflation-Proof Lifeboat
The multifamily sector offers a dependable lifeboat amidst the turbulent waves of inflation. As costs rise, so can the rents you charge, ensuring a stable income stream that keeps pace with the economy.
Dynamic Leasing Terms
Unlike their office and industrial counterparts, multifamily properties boast flexible and dynamic leasing terms. With annual renewals, multifamily landlords can adapt rent prices to ever-changing market conditions.
Anchored by Constant Demand
The nation's housing demand remains steadfast, recession or not. With a need for 4.3 million units by 2035, multifamily properties hold strong against economic downturns. People will always need a place to call home, making multifamily real estate an enduring and dependable investment.
Sailing on the Wave of Renting Popularity
The tide of renting continues to rise, particularly among the under-35 demographic. As renting grows in popularity, multifamily properties will continue to flourish.
Smooth Financing in Churning Waters
Despite increasing interest rates, multifamily properties still enjoy relatively lower rates compared to other commercial real estate assets. Lenders recognize the stability of the multifamily sector, leading to favorable loan terms.
Moreover, specialized loans such as Freddie Mac, Fannie Mae, and HUD loans offer advantageous terms like lower payments, longer durations, fixed interest rates, and non-recourse conditions.
Tax Haven in a Sea of Uncertainty
The multifamily sector benefits from tax breaks, such as the bonus depreciation allowance and 1031 exchanges. These incentives provide financial breathing room during challenging economic times.
If the US goes into a recession later this year, it will be one of the most predicted and forecasted recessions in history. We have been waiting for this recession for quite some time now. However, even if property values decline, our fund will be in a strong position to acquire more assets at a discount. Our Grand Vision Capital fund purchases multifamily investments in favorable markets in the Midwest. The Midwest tends to be more stable and hold value well even in tough economic times. Moreover, our Class B and C properties are positioned on the lower end of the rent spectrum and will always be in demand, especially when times get tough.
So, is the multifamily ship truly unsinkable? No investment is unsinkable, but multifamily properties boast distinct advantages over other asset classes. With adaptable rent prices, unwavering demand, growing rental popularity, and favorable financing options, multifamily real estate stands as a sturdy vessel in uncertain waters.
As Warren Buffett famously said, “be fearful when others are greedy and greedy when others are fearful.”
As fear grips the unprepared during the recession, those ready for the challenge will rise above the crashing waves, achieving extraordinary wealth.
You can schedule a call with our team here.
*This article is my opinion. It is not financial advice, nor is it an offer to sell a security. Anyone interested in investing must first schedule a call with our team and review our private placement memorandums before investing. All investors with Grand Vision Capital Group must be accredited investors. If you are interested in investing, you can schedule a call with our team here.