Today we are talking about the multifamily investment asset class. 

What is multifamily? 

Multifamily can include apartments, single-family rentals, mobile home parks, tiny homes, senior living, student housing, and I'm sure I'm missing a couple more. 

Generally speaking, it's the most popular investment class over the last decade. Today we are going to go over the pros of that asset class. It's important to have basic knowledge of what you're investing in, whether it's single investment syndication, in a REIT, or a private equity fund that's a little more diversified, it's essential to know the basics of what you're investing in. 

The biggest reason it's the most popular class is that it's a necessity. People will always need a place to live. Other asset classes are not necessarily necessities in the way that multifamily is. It applies to a large segment of the population. 

Generation Z occupies about one-third of the US population, and they're entering the apartment market right now. Baby boomers and millennials have been shown to prefer apartment living versus owning a home, partly because many of the incentives for owning your own home have gone away. This is a large segment of the population that needs this investment type to live in. 

Multifamily investments are generally viewed as lower-risk investments, partly because of the short-term leases on the unit and the quick turnover. When someone moves out, you can get an apartment ready fairly quickly. So, there's little downtime, and due to short leases, we can adjust for inflation or catch up to the market and move rents higher and quicker. 

Another position people take on why it's a lower-risk investment is that the economies of scale. So, if you own one single industrial building and that tenant leaves, you're stuck with a giant vacant building. Conversely, if someone leaves in a hundred-unit apartment complex, that's one unit out of a hundred. So, the economies of scale, the security of having multiple units, and the addition of having short-term leases all lend to a lower risk profile. 

And lastly, the financing component of multifamily has always been beneficial to investors. Fannie Mae, and Freddie Mac, supplement lenders, and generally, you have better terms on multifamily than a lot of other asset classes, so in the past, the yield was a little bit greater.