By Jenn LoConte
You know that investing your hard earned money is important in today’s ever-changing market. Securing and growing your nest egg, being able to retire comfortably, and having extra income to enjoy future opportunities are all on your checklist. Until now, in order to get a reasonable return, you likely invested in the stock market, which, let’s face it, can be risky. It’s scary to think about the very real possibility of a recession and if the stock market plummets, you could actually lose a huge percentage of everything you put into it.
A Recession-Resistant Alternative Investment
There is a way to invest your hard-earned money without the volatility and risk; investing in multi-family Class B & C properties. Also nicknamed “workforce housing,” these properties offer affordable housing options to hardworking people who want a solid and safe place to call home for themselves and their families. They’re not million dollar beachfront dwellings that rent for thousands of dollars each month. More likely they are apartments that rent between $600 and $1000/month. They’re not full of extra amenities like a concierge at the door, large clubhouses, or garages, but they do offer affordable and safe communities.
What Makes Class B & C Recession-Resistant?
Regardless of economic conditions, people need a place to live. Those who get displaced from homeownership and/or Class A rentals will move to more affordable Class B and C rental properties. At the peak of the last recession, foreclosures boomed and the need for multi-family rentals increased dramatically. Vacancies went down, rents stayed flat or, in some cases, increased. During the recovery through today, as housing trends continue to improve, the growing demand for more affordable housing also continues to increase.
According to CoStar Group, Moody’s Analytics, U.S. Census PPR, rentals of multi-family properties continue to increase, no matter the financial weather. Investors are purchasing these properties at an expanding rate, even changing the definition of what they consider to be core investments. According to a recent article in Pensions & Investments, investors typically had invested in shiny new Class A downtown towers in major coastal cities, but are now buying buildings that are in secondary markets and offered more affordably.
Another factor in the increase of class B & C multi-family properties increasing vs. decreasing is the next generation workforce. Nicknamed “The Echo Boomers,” these twenty-something millennials, in addition to singles and childless couples, want to rent and sometimes need to rent vs. buy. According to a June 2017 Multifamily Executive (MFE) report, there is now an oversupply of class A luxury properties sitting vacant because, simply, they’re too expensive. The younger workforce values experience over owning, so renting more affordable class B & C properties makes sense. Alongside working families, military households, and others who need more affordable housing, Class B & C properties will ALWAYS be a smarter and more affordable option.
How Can You Invest in Class B & C Multi-Family?
Piqued your interest? If you think multi-family properties are the way to go, you’ll need to decide which investing avenue you’ll want to take. There are primarily two ways to invest: (1) directly, or actively, as an owner or direct partner in the properties or (2) passively, through a fund that invests in multi-family properties; in other words, with an investment company.
If you choose the first option, it will require your time, effort, and expertise in multi-family ownership and management, a large undertaking. Additionally, you may need funding assistance, so you’ll need to work with a reputable lender and potentially need to bring in outside investors.
Choosing the second option as a passive investor will allow you to invest without the hassle of these additional responsibilities and hurdles of finding great opportunities, pulling together all the capital, obtaining loan approval, hiring contractors, and hiring a property manager and maintenance staff to manage the community. It will be essential though, to do your homework and select a fund manager with a solid reputation and sound strategy for multi-family investing.
Larry Hickernell, Jr., Investment Success Manager at DLP Capital Partners, states, “We do more than purchase and renovate. Our strategy is to control the variables. We control the acquisition process, the construction, and the management. Through due diligence and analysis, we have a high probability of achieving our financial objectives because we know exactly how to execute on these investments. Once we acquire and renovate the property, we substantially improve management in order to maximize revenue, while reducing delinquency and vacancies. Over time, our assets are worth much more than what they were originally acquired for.”
The Future Looks Bright
Investing in multi-family Class B & C properties is a proven method that not only works time and time again, it also offers long-lasting successful growth. Investing in a company like DLP Capital Partners offers straightforward investment opportunities with very low risk as a passive real estate investor. Their proven strategy has mitigated risk and provides a track record of consistent returns with zero principal losses to investors while generating consistent cash flow and double-digit annual returns. Learn more about successful multi-family investing with DLP Capital Partners. Set up a call to learn more about our investments and how they can work for you.