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2022 Outlook for multifamily investors

2020 and 2021 were tumultuous years to be a property investor. Concerns with the ongoing eviction ban, inflation rate increases that led to raised rental prices, and uncertainty about new tax laws plagued investors and property managers. Additionally, the single-family home real estate market exploded, flooding the rental market and contributing to the rising prices. 

But, there are reasons to be optimistic about property investment in the near future. While it is difficult to predict accurately what will happen in 2022 and beyond, especially with recent market volatility, there are a few trends that are likely to continue along with some changes to come. Below are a predictions multi-family property owners should be paying attention to.

Keep an eye on inflation in 2022

Inflation was higher than predicted in 2021, and the Federal Reserve recently stated that they could potentially increase the interest rate at least three times in 2022, with a potential total increase up to 0.9%. 

The rate of inflation often affects renters’ willingness to pay premium prices, since rent is typically tied to consumer prices and rise with inflation. Be aware of current economic trends to better understand potential tenants.

Demand for rentals will remain

 With the explosion of the real estate market in the past year, more people are turning to rental units for a place to live. Since the housing crisis in 2008, the supply of rental properties has not caught up with demand, and construction of new complexes has essentially halted. It will be years before supply matches demand again, so rentals will continue to be a premium.

Additionally, Millennials, who make up the largest population of renters, are less interested in purchasing homes that will “lock them down” to one location long-term, preferring rentals which provide more freedom. 

Tenant living habits have changed

Since the beginning of the pandemic, we have seen many changes to the way people work and live. Remote jobs have grown in popularity, meaning that home offices have grown more important to tenants looking for rentals.

Millennials and Generation Z are also moving towards a more transient lifestyle and are seeking community and connection. A good question to ask yourself is what does the community around your property offer?

Are there opportunities for tenants to engage with others in shared activities? Other desires tenants may be looking for include outdoor spaces for small gardens, the “feel” of a neighborhood, and an emphasis on technology. Since rental prices are higher than in the past, potential tenants want to make sure that the unit they are moving to meets their needs.   

Effects of 1031 exchange laws

Many property investors began to panic when they saw that the current administration was considering changing the tax laws around 1031 exchanges. However, in the final draft of the law, this provision was not included. The new law would have placed a cap on gains above $500,000 per year on an investment property exchange. While this addition may be revisited in the future, the current 1031 exchange laws remain intact for now. 

Whether you are a real estate investor or a multifamily property owner, it’s important to be aware of the coming trends in the housing and rental market for 2022 and beyond.

Along with increasing rental unit prices, tenants’ expectations for their rental experiences have also elevated. Many multifamily property owners are rising to the occasion to meet these additional demands, while taking advantage of the larger number of renters in the marketplace.

Even though there has been plenty of reasons for concern over the last two years, property owners can be optimistic about the future of their investments as the economy continues to recover and demand for rentals remains high.

Joan Rohrer is the founder and President of JMR Company, Inc.

This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.

To contact the author of this story:
Joan Rohrer at jroher@jmrco.org

To contact the editor responsible for this story:
Tracey Velt at tvelt@realtrends.com

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