A recent article in Globe Street highlighted how Class B apartments are outperforming other commercial real estate assets in 2023.
This caught my eye. If you saw the title, it would have caught yours too, given all the news about apartment foreclosures and vacant buildings.
Now you might be scratching your head a bit. Foreclosures, market downturns…
How are class B apartments outshining other assets?
Better yet – how does this impact you as a passive investor?
Keep reading and we’ll show you.
The Surprising Rise of Class B Apartments
Class B apartments are outperforming other commercial real estate assets, with a rent growth increase of 1.4% in 2023.
This growth outshines both luxury and more affordable properties.
But why?
Not all real estate is built equally. Improved consumer confidence, lower inflation rates, and the dodging of a predicted recession have added to Class B’s performance.
Despite a decade of rising housing costs, Class B units remain in high demand due to their affordability, and this trend is expected to continue through 2024.
Understanding the Current Apartment Landscape
The real estate market is currently navigating through a time of uncertainty, have you noticed it also? It’s kind of hard not to.
With a record low of apartment construction permits in 2023, the market is experiencing a push towards lower prices as new units come to market that were started in 2020-2022.
People always need homes, and the fear in the market is creating unique opportunities for investors.
The Appeal of Class B Apartments
So, what makes Class B apartments the standout asset in today's market?
Firstly, Class A apartments are often too expensive for the average renter, and Class C properties don't offer the amenities and living conditions many desire.
The continued housing shortage and the affordability of renting Class B units make them highly attractive. Plus, the easing of inflation and signs that we've avoided a recession contribute to sustained demand for these types of properties.
Why Now Is the Time to Invest in Multifamily
For passive investors, the fundamentals for Class B apartments are incredibly strong.
Although prices are currently down, indicating we're near the bottom of the market, this presents a golden opportunity to invest wisely.
The demand for affordable housing, combined with a continued housing shortage and the affordability of renting, positions Class B apartments as a top investment choice for the coming years.
What You Should Take Away
As we navigate through these times, it's crucial to stay informed and focus on the fundamentals, which remain strong for Class B apartments.
Look for experienced operators with strong business models – buying at low prices – and educate yourself to learn which ones you should invest with.
If you're a passive investor looking for opportunities like Class B apartments, now is the time to get started.
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