Warren Buffet is famous for saying, “Be fearful when others are greedy, and be greedy when others are fearful.”
Officially entering a bear market in June 2022, the stock market has retracted by 20% since January. Cryptocurrency plunged from $68,000 in late 2021 to $21,035 on June 24, 2022. The federal reserve is aggressively raising interest rates trying to tame inflation, which has been at its highest levels in more than 40 years.
To say that investors are fearful is an understatement.
Even if the apocalyptic predictions made by the media do not come to fruition, the economic forecast is rather grime. These conditions devastate traditional stocks and mutual funds, leaving investors scrambling for safer ground. If you are willing to look beyond conventional market investments, there are solid opportunities in multifamily real estate that could bring above-average returns even in a bear market.
Here are five reasons you should invest in multifamily housing in 2022:
- Real estate is a hedge against inflation: Real estate is less volatile than the stock market and does not move in tandem with market indexes. Multifamily is one of the best asset classes within real estate during a recessionary climate because housing is an essential living expense. Unlike other commercial real estate, such as retail or office complexes, multifamily does not typically contract.
- Revenues tend to keep up with inflationary costs: Multifamily housing involves short-term leases, allowing landlords to pass on higher costs to tenants at each renewal. Currently, rent increases are outpacing inflation and are positioned to continue for many years to come, buoying investors’ returns.
- Rising real estate prices drive demand for rentals: The affordable housing shortage translates into more people renting longer. Due to rising housing costs, it takes more money and higher incomes to purchase a home today. This factor increases demand for multifamily housing, positively impacting rents and the profitability of multifamily investments.
Not every region will see rent growth in 2022 and beyond. However, markets with positive net migration are hotspots for multifamily housing, providing double-digit returns for investors due to high demand. We focus on buying/operating apartment communities in the Business Friendly and Landlord Friendly States across the South and Southeast from Texas to Florida.
- Economic factors beyond inflation: Despite the pending recession, due to inflation and rising interest rates, other economic indicators, like job growth, remain strong. Robust employment opportunities reduce risk in multifamily housing because when people have jobs, the rent tends to get paid. During the past two recessions, multifamily outperformed all other real estate asset classes.
- Leveraging debt and taking advantage of tax benefits can grow your portfolio faster. Real estate syndications further leverage your ability to diversify by combining equity capital with a team of investors who become partners in the acquisition. In 2022, you can also take advantage of bonus depreciation, giving you additional tax benefits on your real estate investment.
Despite the apocalyptic economic forecasts, now could be an excellent time to gain wealth in real estate through multifamily syndications. We produced a short introductory video if you want to learn more.