Multifamily is the safest investment next year, particularly with rising fears of a recession. The asset class is more protected against downturns than any other asset class, making it a safe investment as the cycle matures.
"Multifamily is definitely more protected against economic downturns than any other type of property," Nat Kunes, SVP of investment management at AppFolio, tells GlobeSt.com. "A shift in the economy doesn't mean people will forgo homes. They might forgo retail experiences, which may force retailers to close up shop—literally—but people will always need homes. It's as simple as that. Yes, the multifamily market might experiences subtle shifts, but those shifts are nothing in comparison to the impact felt by investors in other property types."
Kunes is continually bullish on the apartment market, largely because the asset class has proven to be a strong performer during a downturn. "Multifamily is a safe bet in the real estate investment ecosystem because, historically, it's always been an in-demand asset class," he says. "Unlike retail property, the value of which might shift dramatically depending on larger, economic factors, multifamily is generally shielded from significant market swings. People need housing, and as a number of potential homebuyers continue to get priced out of the market, multifamily renting remains a top choice for many Americans."
Like 2019, secondary and tertiary markets will continue to be the top investment markets in 2020. "Secondary and tertiary markets continue to grow, due to strong job growth as well as major companies moving out of primary market hubs and into secondary markets to cater to a broader set of talent," says Kunes. "As younger generations continue to move to markets where they get more for their dollar and where living expenses are more reasonable, growing companies in need of fresh talent will follow them there."
With the risk or anticipation of a recession growing, Kunes recommends investors enter multifamily deals with a long-term hold strategy. "I would encourage any investors who are just getting into the real estate segment to focus on long-term investments and long-term holds on properties," he says. "Short-term investments are a financial risk in many cases. I'd also encourage investors to be smart about their choices – know and understand the market before making an investment decision. If your business is large enough, partner with an investment management company to help you better navigate investment decisions."
The winter season at the end and the start of the year are also a good time to capitalize on opportunities. "In the winter months, buying tends to be slower and that sometimes leads to better opportunities in the market and less competition," says Kunes. "It's dependent on what comes on the market, but investors should definitely pay attention to the market in winter, in case there's a great opportunity to be had. The end of year is also when many timed real estate investments funds come to an end, so many properties come back on the market."
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Kelsi Maree Borland
