The outlook is good for multifamily apartment investing in 2023. Occupancy rates are expected to remain steady, and rents should continue to increase in many areas. Investors should be able to benefit from steady cash flows and benefit on the tax front. Here, we dive into a few key reasons why the outlook is good for multifamily apartment investing in 2023.
Would-be Buyers are Choosing Rentals
Multifamily apartment rentals have now become more appealing to those that were looking to purchase single-family homes over the last six months. The rise in interest rates has priced a lot of potential homebuyers out of the market.
Rents Have Increased and Will Remain High
In 2022, rents increased by approximately 6-10% throughout most of the country. While rents are not expected to grow that significantly in 2023, they are still expected to increase.
Occupancy Rates are High
US occupancy rates rose to 96.5% last year. High occupancy rates provide investors with improved cash flow and the ability to use excess cash to distribute to investors or put back into improvements for the project.
Even with the latest rise in interest rates, investors can still benefit from acquiring projects that have a high occupancy rate, or projects that have a lower occupancy but need a lot of capital improvements to complete and justify future rent increases.
It’s a Low-Risk Investment
Cap rates are below the historical average due to the increase in interest rates over the last half of 2022. In 2022 many project owners benefited due to the above-average rent increases and increased occupancy rates compared to prior years.
Rising Interest Rates Bring Opportunity
In times of rising interest rates, there are opportunities for both sellers and buyers if the project has an assumable loan attached to it. HUD and agency loans can be assumed by the buyer if they qualify and meet the requirements of the existing lending programs. The seller usually pays a small fee to the lender for the buyer to assume the project.
How to Invest in Multifamily Apartments Without Experience
Your first step to success is learning how to invest in multifamily apartments. There are a lot of investors that purchase and manage their own projects. If investors do not have experience managing apartment projects of similar size and scope, it is recommended to hire a management company that has the necessary experience, a large portfolio, and a successful track record.
Find the Right Loan to Invest in Multifamily Apartments
There are a variety of loan products and options available for buyers of multifamily apartments, depending on the strategy involved. LSG Lending Advisors will assist you through the process and provide a term sheet for the loan product that best suits your needs. Schedule a free phone consultation to get started with multifamily apartment investing today.