As a real estate professional, I try to meet regularly with other agents, builders, developers, investors, and lenders, in order to educate myself as much as possible on the market and trends I should be paying attention to. One newer trend that keeps popping up is the concept of “Horizontal Multifamily Communities”.
What is a “Horizontal Multifamily Community”?
These are communities that are Built-to-Rent, meaning a series of single-family homes that are built for the sole purpose of being rented. Unlike traditional multifamily buildings, these “apartments” are standalone buildings, without other units above or below. In some communities, residents do share walls with their neighbors, similar to townhomes. While in other communities, each unit is entirely separate. Horizontal multifamily communities offer residents the privacy of single-family homes with the added benefits of multifamily amenities and even on-site property management.
Reasons to invest:
1. There is a real demand for Rental Communities
Real estate analysts say that build-to-rent communities are one of the fastest-growing trends in the multifamily sector today. The number of built-to-rent homes increased by 30% across the country from 2019 to 2020, according to The New York Times. They account for about 6% of all new houses built in the United States and are projected to double in the next decade or so.
2. Faster Absorption Rates
As an investor, you always have your eye on the clock. Measuring how long everything takes, in order to minimize expenses and maximize profits. So the question is if you are building new homes, which is faster/easier to find, buyers or tenants? Because you are more likely to find tenants the fastest, these build-to-rent communities offer faster Absorption Rates.
3. Better Cash Flow
In the eyes of an investor, Cash Flow is King. With build-to-rent projects, you are able to build consistent cash flow without depreciation. Not only do horizontal multifamily communities have a lower construction cost than traditional single-family homes, but they also offer greater occupancy rates. Additionally, these properties tend to utilize an income capitalization approach for their valuation, rather than the standard sales comparison approach. Giving, in most cases, a greater benefit to the investor.
4. Lower turnover rates
When comparing traditional Vertical Multifamily properties (apartment buildings) and Horizontal Multifamily properties, renters are looking for two different things. Overall, horizontal multifamily renters are looking for a long-term home to support their growing family or for their retirement plans. As a result, you can expect renters to sign longer, multi-year leases, which reduces turnover costs.
If you are tired of investing the traditional, vertical apartment buildings, it's time to consider investing in horizontal multifamily communities! Don't miss out on this opportunity to diversify your investment portfolio and provide your tenants with a truly exceptional living experience. Invest in horizontal multifamily communities today!
Licensed in MO and KS
David Williams is the Burke Team's Commercial Real Estate Specialist. He is a decorated sales professional who puts an emphasis on building Client Relations. With experience in commercial buildings, cash flow multi-family, and vacant land, David approaches his valuations from a profit-minded standpoint with his unique set of skills. He is heavily invested in commercial focused resources to better serve his investment clients.