Immigration and Youth Increase Demand for South Florida Multi-Family Property

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Current housing trends show more immigrants and more young people moving into rental apartments in multi-family property. According to the South Florida Business Journal, rental rates in South Florida are the highest in the state.

People born in foreign countries who move to the United States are more likely to rent apartments in multi-family property than people who were originally born in our country. This trend has been confirmed in a recent study from Harvard University. While immigration has experienced a slight downturn because of the recession, it is likely to increase dramatically as the economy begins to improve.

Renter households increase while owner households decrease

From 2006 – 2010, on a nationwide basis, the number of households renting increased by 3.4 million, while those owning homes decreased by more than 1 million. In South Florida, where foreclosures continue unabated, thousands of families losing homes are moving into middle and high -end rentals in multi-family property in record numbers.

In addition, the prices of rental apartments began to move upward last year, and vacancy rates have decreased. At present, it is estimated that there are more than 39 million rental households in the United States.

Young people are not buying so fast; older people are renting.

What is an even more interesting trend is that young people are not purchasing homes as quickly as they used to, while older owners are moving to rentals, rather than purchasing new residences.

What the Harvard report suggests is that because of this continually increasing demand for rentals in multi-family property, multifamily housing construction starts may be on the way to an upward bounce. Last year, fewer than 125,000 multifamily rental units were built, which marked the lowest increase in this kind of building in the last 17 years.

Shortage of multi-family property rental units will push up rental rates.

However, despite this minor increase in building, the Joint Center for Housing Studies says that demand for rental units between 2010 and 2020 will increase by 360,000 and 460,000 families every year. Unless multi-family property housing starts rise dramatically, we are likely to be short by 200,000 rental units yearly.

Because of this increasing demand for rental units, some cities have recently experienced dramatic rises in rent. Austin, TX saw rents move up an average of 17%, while Boston saw some rents jump by close to 30% this year. According to the Census Department, double digit increases are on their way to most cities because of lack of available multi-family property rental units. Vacancy rates in our area have hovered around 10%, but economists predict that these rates will drop to 5% by 2012, which, or course, adds up to higher rents. Partly as a result of this trend, South Florida’s median rents are running well above $939.

The National Association of Real Estate Editors predicts that rental rates in multi-family property across the board should rise between 3.5 and 4.5% during 2011. Much of this increase will come from the 1.2 – 2.2 million people who will change their status from owners to renters as they lose their homes due to foreclosure.

Money is available to commercial investors.

The good news for South Florida multi-family property investors, according to Globe, is that capital is available in the state. Deals are in process all through the region, lead for the most part by life insurance companies who see the rising value in multi-family housing. While loans from Fannie Mae and Freddie Mac are still available, there are many loan options open to investors in today’s market.

If you’re just starting out, bear in mind that buildings with 5 or more units are considered to be commercial real estate by lenders. That means you should be prepared to put down a minimum of 25-30% of the purchase price of a multi-family property if you apply for a mortgage. While 4 units or fewer may be considered to be residential property, you will still need a 25% – 30% down payment for this property, unless you are planning to live in one of the units.

Marc Jablon, The Jablon Team
Realty Associates
[email protected]

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Marc Jablon