Why do we only invest in multifamily?
There are many options for investing in commercial real estate, including retail, office, and industrial spaces, but also RV parks, self-storage facilities, and hotels. Arlast Capital only invests in multifamily assets and we want to share why this might be an attractive option for you. Multifamily has a number of advantages over other real estate asset classes.
Multifamily Advantages
1. Resilience in Economic Cycles
One of the most compelling advantages of multifamily real estate is its inherent resilience across economic cycles. Unlike office or retail spaces, which can be heavily affected by economic downturns and shifts in consumer behavior, the demand for residential units remains relatively stable. People always need a place to live, regardless of the economic climate. This stability makes multifamily assets a safer harbor during periods of market volatility. For instance, during the economic disruptions caused by the COVID-19 pandemic, many sectors saw dramatic declines in occupancy and revenue, while multifamily properties generally maintained higher levels of performance.
2. Cash Flow Consistency (diversification)
Multifamily properties typically offer more consistent cash flow compared to other types of commercial real estate. This is due to the collection of monthly rent from multiple units, which mitigates the financial impact should one or a few tenants fail to pay. In contrast, commercial properties such as large retail or office spaces often rely on a smaller number of tenants, making them more vulnerable to tenant business issues or bankruptcies, which can significantly disrupt income.
3. Economies of Scale
Operating multifamily units can be more cost-effective due to economies of scale. The cost of maintaining and managing a multifamily complex is spread across many units, making per-unit expenses lower compared to managing several separate commercial properties. Additionally, improvements and amenities can be centralized, further reducing costs and enhancing the attractiveness of the property to prospective tenants, which can drive higher occupancy rates and increase rental income stability.
4. Financing and Investment Accessibility
Multifamily properties often enjoy more favorable financing options. Lenders typically view these assets as lower risk due to their stable cash flow and demand consistency, which can lead to better loan terms including lower interest rates and higher loan-to-value ratios. This accessibility makes it easier for investors to enter the market or expand their portfolios with less capital restraint.
5. Demographic Trends Favoring Multifamily Investment
Long-term demographic shifts also favor multifamily investments. Increasing urbanization, a delay in home purchasing among millennials, and the rising trend of single-person households contribute to sustained demand for apartments and other multifamily units. These trends suggest that the multifamily sector will continue to see growth in tenant demand, which is not as pronounced in commercial sectors like office spaces, where telecommuting policies are diminishing the traditional demand for large office environments.
Summary
Multifamily assets offer a blend of stability, consistent cash flow, cost efficiency, accessible financing, and favorable demographic trends. These characteristics make multifamily properties a particularly attractive option for investors looking to mitigate risk while capitalizing on long-term growth opportunities in the real estate market.
If you are interested in multifamily investment opportunities, please express interest on our investor portal and a member of our team will be in touch.
