Multi-Family Real Estate: The Latest Real Estate Trend

In 2018, CBRE reported that the highest average annual returns were seen in the multi-family market across a 25-year term of all the real estate sectors. This research showed that multi-family homes had a 9.75% average annual total return. Hotels showed an average total return of 9.61% and retail development 9.44%. 

What these numbers show is a market on the rise. With services such as Airbnb, multi-family homes are filling some of the demand in the hotel industry. In cities like Victoria and Vancouver, BC, vacant retail and office spaces show a decreased need for more retail developments. 


Why is there an increase in demand for multi-family homes?

Millennials are buying into a market that’s challenging to afford. With soaring housing prices, new buyers are struggling to buy homes. Multi-family homes offer rental income to assist with mortgage payments, making them the perfect solution for young families. 

According to a Forbes report, baby boomers are opting to rent rather than downsize and buy. Many families and individuals cannot afford to buy homes in expensive cities like Vancouver and Victoria, creating more renters than available rental homes. In Victoria, the vacancy rate for rentals in 2020 was just 2.2%. There’s a need for affordable rentals, and this need benefits homeowners looking for rental income. Multi-family homes are the perfect solution. 

Consider two things: assisted living facilities and affordable childcare. Multi-family homes allow young families to take care of ageing parents while having someone to help look after children. This wasn’t as common in Western cultures until cultural shifts and the current economy made this living situation a necessity — not to mention ideal.


What does this mean for REITs, pension funds, and real estate companies?

The increased demand in this market means that multi-family homes often receive better funding terms and mortgage conditions when compared to other forms of commercial real estate. 

We’ve spoken about REITs in the past. This form of investment pools the money in physical properties that often generate income, such as hotels and apartments. As mentioned above, the hotel market isn’t experiencing the same demand as multi-family homes. Therefore, the market need is driving investors to focus on this shift to multi-family homes for sale to capitalize on the potential revenue. 


Can you capitalize on multi-family homes without buying them individually?

For experienced investors, this demand is an opportunity. However, owning multiple properties and managing tenants can be a large undertaking with significant risk as an alternative investment. Investing in a pooled investment through a MIC allows savvy investors to capitalize on this opportunity without taking on ownership of a multi-family home. 

At Cooper Pacific, we fund both first and second mortgages on short-term loans. These range from subdivisions, townhomes, commercial developments, and condo projects. With the rise in multi-family real estate, we’re seeing a drastic increase in multi-family subdivisions as projects seek funding. To learn more about the projects that make up our portfolios, get in touch with Jordan on our team today.

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