Multifamily Market Likely to Weather COVID-19 Crisis

According to a new report from Yardi Matrix, the multifamily housing market is likely to weather the COVID-19 crisis at least as well as other real estate sectors and, quite possibly, far better.

“The multifamily industry may feel the impact of the domestic spread of COVID-19…however, most real estate investors are poised to sustain their operations and may see an investment opportunity as the market shocks continue,” Yardi analysts wrote in their newly published “Economic and Coronavirus Update National Multifamily Report.”

While many investors with single-family real estate holdings worry that eviction bans and mandatory “shelter-in-place” regulations will prevent tenants from generating income and paying their rents, multifamily investors are, according to Yardi, unlikely to experience the “domino effect” of unpaid rents many in the industry find so concerning.

“Owners and operators may face short-term rent collection issues is there is a tightening in the employment market, and value-add projects will likely slow.” Analysts admitted. However, they added, those effects will likely be short-term[1].

“From an investment perspective…we expect the impacts of coronavirus to last three to six months before a steady recovery boosts the economy once again. Given the short-term nature we anticipate, this could offer an investment opportunity for owners with ample cash available,” Yardi said.

The group concluded with this positive message:

“We have yet to see a negative impact on housing demand. The length of the recent expansion, as well as the cautious approach of banks and lenders, has left most owners well-balanced from a leverage standpoint…. Overall, the multifamily market and the real estate industry as a whole are positioned favorably compared to other industries during this time of rising uncertainty.”

Multifamily Investors Turn Attention to Mobile-Home Parks

Some investors who already are invested in multifamily real estate are also branching out into other, related options as the country continues to self-isolate and economic uncertainty looms. Although private equity funds have been sinking capital into manufactured housing communities for several years now (Blackstone acquired 14 communities for $172 million in mid-2018), individual investors investing in mobile home parks have largely flown under the radar until now. With the threat of large-scale housing down-sizing pending, however, investors already active in the space expect to see more industry-wide interest in the near future.

“I think with everything going on, folks are going to be looking to cut expenses and downsize,” predicted Eloy Zamora, a multifamily investor who already has capital in several mobile-home-park projects. “Mobile-home projects represent the perfect real estate asset to fill this need,” he added.

Zamora said that residents will often see more value in placing their household in a mobile-home park than in a multifamily apartment complex. “If you are paying $600 in rent for an apartment, you might not necessarily find the maintenance, amenities, schools, and general safety in the area exactly what you want in a lot of areas of the country,” he explained. “On the other hand, compare that to a clean, well-maintained mobile-home park in a good neighborhood for the same price, and the manufactured housing community is a highly attractive option for just about anyone.”

Forbes contributor Brian Spear agreed. “As middle- and lower- class families continue to be pressured financially, growing demand for inexpensive housing makes mobile-home parks an attractive housing option for those who are unable to pay the costs of conventional homes,” he wrote. Spear also noted, “I've found that mobile-home parks typically trade at higher yields than most other commercial assets” and also called them “recession-resistant” and praised them for “low tenant turnover.” [2]

Are you investing in multifamily housing at present? Have you or will you be investing in mobile-home parks?

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