Are Multifamily Properties Recession Proof? Part 2


With nearly 40 years in business, Braden Equities Inc. is a premier property management company in Edmonton and the surrounding area. Our management style is tailored to the unique needs of each one of our clients, and we work as a team to ensure that every project is treated with the care and attention it deserves.

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Are Multifamily Properties Recession Proof?

Multifamily properties in Edmonton hold an advantage over commercial real estate because they enable the investor to more easily maneuver cash flow. Long term leases like those you find in office buildings do not allow for the frequent rent adjustments that are possible with multifamily investments. The reason for this is that leases on apartments are usually 6 to 12 months long rather than several years as with commercial.

Additionally, apartment buildings have a much greater potential for density compared to commercial buildings due to there being more individuals and shorter-term leases. This provides investors with the flexibility to adjust to changing markets.

One of the biggest advantages of multi-family investments is that we can quickly and dramatically increase the value of an acquisition by increasing its net operating income through sound management principles. By transforming a poorly managed property into a well-run property, investors can quickly realize the benefits of refinancing, and reinvesting that equity into other multifamily investments.

Related: Choosing the Best Type of Real Estate Property Investment and Why Rent a Suite That is managed by Braden Equities Inc?

Let’s take a look at some stats from Cushman and Wakefield that will help us to predict what 2016 will hold for the Edmonton rental market.

 

2014

2015

Vacancy (%)

1.7

4.2

Average Rents ($)

1,103

1,137

Sales Volume ($)

356M

413M

Sales (Units Sold)

2,281

2,624

Cap Rate (%)

6.0

5.9

What this information tells us is that although the vacancy rates did increase last year, so did the overall sales volume, as well as the price of rent. This has had something of a balancing effect when it comes to the pocketbooks of multifamily property investors. Although most experts are predicting some minor increases in vacancy during 2016, investors can mitigate this through a number of tactics, such as making improvements to their property that will appeal to renters.

The fact of the matter is that the demand for residential housing will always exist whether the market is going up or down because people will always need a place to live. That in and of itself gives multifamily an advantage over other types of real estate investments. 



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