Are Multifamily Dwellings a Better Seller Funded Investment in 2009?
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According to Bloomberg single family home starts rose in July 2009. That’s good news, right? Well, that may be true for the home building industry but many analysts wonder if this surge makes sense in the face of the US enormous single family housing supply. Some expect single family construction to have a sharp, painful confrontation with reality when home buyers realize they already have their pick of homes.
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For an investor in seller funded mortgages multifamily swellings might be a better bet in the long term. Multifamily dwellings are flexible income generators for owners and tap into the fairly secure rental market. More importantly, multifamily starts are on the decline, which means that after a suitable period of adjustment their prices may climb sooner and in a more sustainable fashion, driven by a supply more in line with true demand.
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Don’t give up on single family homes yet! People will always want the traditional family home – but as single family starts increase in the face of vast numbers of bank-owned properties it’s reasonable to suspect that aspiring homeowners will look to existing homes they can purchase for next to nothing.
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This takes place in the context of a significant shift in urban development, where the suburbs – the traditional staging ground for new single family homes – are being increasingly rejected by young families in favour of living closer to the office and main urban infrastructure. This ultimately stems from increased gas prices that make the old commuter lifestyle much less of a bargain than it used to be – and as a side effect, it may increase demand for multifamily properties even more, as total lifestyle costs make apartments, townhouses and condominiums more attractive to growing families.
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If you plan on financing a seller-held mortgage note on a multifamily property now may be the time to start planning, so that when the adjustment comes you’ll be ready to smoothly negotiate a loan with your borrower.
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