1. MILLENIALS

According to data from the U.S. Census Bureau, renting represents the most common form of housing for the millennial generation, the largest generation in U.S. history. In fact, whereas the national rate of home ownership for the population overall was 64% in 2016, for millennials aged 25 to 29 it was just 31%, and for millennials aged 30 to 34 it was only 45%. So why is this happening?  The median home price is rising, putting home ownership out of reach for many in this generation.   Many are marrying later in life, and value mobility and flexibility before setting down "roots" in a community, and renting fits this need - which means demand for rentals is at an all-time high!

On the other end of the age spectrum is the baby boomer generation, generally 56-76 years old.  As THEIR kids start lives of their own and many look to downsize from traditional home ownership, the National Multifamily Housing Council and National Apartment Association cited in a 2017 report that renters aged 55 and above account for more than 30% and growing yearly of rental households.  This generation is often looking for rentals that are hassle-free, after spending years taking care of their own lawns - they're ready to have someone else shovel snow for them! Baby boomers can afford to buy a traditional home, but many enjoy the rental life, finding comfort in leaving the maintenance to others, which once again, contributes to a strong demand for rentals.

Residential lease terms allow for faster rent increases than long commercial lease terms which means faster growth.   While investing in commercial real estate can be attractive, leases are often locked-in long term, most being 5 years or more.  Multi-family rentals are typically 12 month leases and allow the flexibility of more easily raising rents as market conditions change and evolve.

There's many tax incentives for multi-family property owners as well including making energy efficiency improvements to the property. Recent tax reform allows approximately 20% deductions for qualified business income. Investors with passive rental income may also avoid additional self-employment tax. 

There are limitations for income to be classified as passive, such as how much time and effort you contribute towards the property each year, but passive income allows for better tax treatment since you may not have to pay self-employment tax on that cash flow. Knowing how complex taxation can be, ensure that you are getting all of the deductions and credits you qualify for, consider seeking professional advice from your accountant or a professional who specializes in tax benefits.

Mortgage terms, lower mortgage rates, loan-to-value ratios and debt service coverage ratios are the most favorable compared to commercial real-estate sector. This lowers debt service which helps your cash flow!  If you plan to live in your multi-family investment, you may also qualify for a lower rate.

You can control the investment unlike the stock market or other investments. You have your finger on the levers that control income streams when owning multi-family properties. Consider cash flow from rent and amenities. There can be multiple revenue streams outside of just rent depending on the property location size and needs of the tenants. Many additional income streams can be in the form of fees; examples of fees include parking, storage, pet fees, laundry fees, vending fees. There are even amenity use fees such as cable, water and Wi-Fi use if you pool those utilities to the building and deliver to tenants directly.  There are companies that will perform use calculations and charge fees on your behalf.