Magazine article Journal of Property Management

Current Trends in the Multifamily Sector

Magazine article Journal of Property Management

Current Trends in the Multifamily Sector

Article excerpt

Low interest rates + Increasing occupancy + Rising rents = LOWER CAPITALIZATION RATES = GREAT TIME TO SELL/DIFFICULT TIME TO BUY

Tax & Finance

Tax Shelter Helter Skelter

Tax issues remain a major issue for real estate investors of all types: REIT, corporate, high net worth individual, family partnership or mom and pop. While some issues might have more of an impact on one type of investor than another, generally speaking, the talks of tax reform and its impact on real estate investors has been worrisome across the board. The following issues remain an imminent threat:

--The Bush Tax Cuts

--The 3.8 percent Tax and Obama Care

--Carried Interest Tax Benefits

--State Specific Earnings Taxes on Partnerships

Stocking Away Cheap Money

* Speaking of low interest rates, contrarian investors who know that now might not be the time to buy are taking advantage of low interest rates and repositioning the debt on their properties. Not only can this help to improve cash flow, but it allows them to set money aside to invest when things aren't so great and this constant demand has disappeared.

New Faces in the Crowd

* Strong fundamentals drive investor demand for multifamily housing. The end result is not just an increase in sales activity but also in new players entering the marketplace. The following equation best describes today's market.

--Low interest rates + Increasing occupancy + Rising rents = Lower Capitalization Rates = Great time to sell/Difficult Time to Buy

That's a Big Portfolio You've Got There

* The past year has seen several major portfolio mergers and acquisitions, including moves made by Bell Partners, Equity Residential, AvalonBay and most recently, a merger between MAA or Mid-America Apartment Communities and Colonial Properties Trust. Further proof that the demand for multifamily housing is broad and is not just for mom and pops.

Construction & Development

Shovels in Dirt Don't Hurt

* Developers are building apartments at the highest rate post 2005. Not only does this generate financial returns, it stimulates the economy through the creation and addition of new jobs.

--See, the low interest rate party is not just for the for-sale market, it helps developers, too.

Smaller Units, Higher Occupancy

* To ensure affordability in today's climate of rising rents, many multifamily developers are building units that are smaller in square footage. …

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