“The United States is not building enough housing to meet demand. The current annual rate of construction is about 370,000 units below the level required by long-term housing demand. And after years of low levels of building, a significant shortfall has developed, with between 0.9 and 4.0 million too few housing units to accommodate long-term housing demand.”– FreddieMac.com
If you paid any attention to your high school or college economics class, then you might remember learning about some pesky things known as “asset bubbles”.
To refresh your memory, an asset bubble is simply what occurs when the price of an asset , be it stocks, precious metals, or housing, becomes over-inflated. These kinds of price spikes can occur for a variety of reasons, including speculative investing, or they can arise as a result of naturally-occuring demographic shifts.
The financial media is prone to focusing on just one or two of the signals that an asset is forming a bubble. In reality there are many other indicators that must be present in order to determine a true bubble. At the risk of causing your eyes to glaze over, I will spare you those details for now.
Let’s just say that in most cases, especially in the case of multifamily investing, bubble warnings seem a bit premature. Experience tells me it’s harder than cat herding to declare a bubble with any degree of accuracy.
That doesn’t mean people don’t try. Turn on the television or talk radio any day and you are likely to hear some financial pundit warning about asset class bubbles.
Here’s what I tell people when they ask me if I think multifamily investing is going into a bubble in the near future. Again, I don’t think that I, or anyone for that matter, can be 100% sure when calling an asset class bubble.
But, as you know, I live in the world of data, math, facts, and meticulous research, so I do have some observations and opinions.
- The United States is behind in building enough housing to meet demand. There have been several years of low building levels and this has combined to create a significant shortfall. Reports from Freddie Mac and other sources contend that as of early 2019, there is a shortage of between 0.9 and 4.0 million units needed to meet long term demand.
- Vacancy rates, which are expected to increase slightly in the next few years, are still below the long term average.
- Rental rate growth, which has averaged slightly above the long-term average of 2.4% during the past three years, is expected to hold steady at the long-term average in 2020 and 2021.
- Government-sponsored initiatives, such as Opportunity Zones, could potentially increase the odds of success for multifamily investors.
- If you know the right data on which to focus, you can locate the best markets for investing- markets that will pay off in a good economy or a bad one.
As someone who is in it for the long term, you should focus your attention more on educating yourself as thoroughly as possible about how to invest in multifamily than on the idea of bubbles. That’s why I encourage you to check out my critically-acclaimed “Apartment Magic Bootcamp.”
Whether you are a seasoned investor or are a newbie, you will find my online bootcamp is one of the best ways to discover the tools, skills, and mindset you must have in order to create wealth in multifamily real estate.
It’s chock-full of content and refreshingly devoid of the usual fluff, hype, and attempts to sell you expensive coaching packages. My promise is that you will learn things in our bootcamp that you won’t learn anywhere else and will wind up a more confident, savvy real estate investor as a result.
Whether you are interested in becoming an active investor, syndicator, or passive investor, “Apartment Magic” will be a powerful edition to your tool bag, reducing your learning curve helping you avoid costly mistakes in multifamily investment. The next bootcamp starts on Monday, June 3rd. Don’t miss it!
Check it out here: Apartment Magic Bootcamp
Founder & CEO
Grocapitus & Multifamily
“Neal’s MultifamilyU eBootCamp delivered fresh ideas, actionable content, and valuable resources in a super convenient, yet intimate and interactive format – with absolutely no fluff or sales pitches. His command of the material, rapid and energetic delivery, and real world experience combined for the perfect ‘crash course’ over a 2 week period. I’m already in a dozen MF deals yet I still got great value from participating. Neal shares cutting edge underwriting, marketing, and management techniques I’ve not heard even from other top educators and coaches. I strongly endorse and recommend his course for all multifamily investors, active and passive, newbie and experienced alike”
David G. (Florida), March 2019
James Rey, Rockridge Group
Elizabeth Sanchez, Bootcamper, Multifamily Investor
28.2% Projected AAR · 2.3x Projected EM · 1031 Exchange · QRP · Solo 401K · SD-IRA
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