They say once you start following the trend, it’s too late. But let me qualify that for a second: By the time you recognize it as a trend, it’s already too late. So, the key to profiting off a trend is to recognize it before it becomes one. That’s why I say multi-family real estate is going to be the class to get into for 2017.
The Traditional-MPL Partnership Putting a Spotlight on Multi-Family RECF
Real estate crowdfunding (RECF) has been very popular in recent years. In the UK, it accounts for more than 20% of all crowdfunding. While the UK might boast of the largest RECF sector as a percentage of crowdfunding, the biggest deals in RECF have been in the U.S. That shouldn’t come as any surprise since the U.S. boasts the largest economy in the world, based on nominal GDP. But one rising sector of RECF is multi-family, and there are several reasons for this.
For starters, when a company like Mara Poling, a large traditional multi-family real estate company, partners with a marketplace lending firm, that should say something. Recently, Mara Poling announced a partnership with RECF platform Lending Tree.
Why is this important? It’s important because it represents traditional real estate companies moving toward RECF. While crowdfunding platforms, including Sharestates, have offered multi-family deals prior to this partnership, this is the first time a traditional real estate investing company has partnered with a crowdfunding platform for that specific purpose. That may not signal the start of a trend; but, then again, it might.
Why Multi-Family Real Estate Will Continue to Grow
Freddie Mac published its mid-year outlook for multi-family housing in August 2016. The conclusion was the market for multi-family housing will remain stable through 2016 and into 2017 while growth will be steady.
One of the reasons multi-family is such a hot real estate market is because millennials, the age cohort now entering their 30s, are remaining single longer and prefer urban living where multi- family housing is prominent. Because they’re remaining single longer, millennials are not buying homes until much later that previous generations, but they have to live somewhere. That makes multi-family housing much more attractive to this age cohort, which makes it a good investment overall.
Of course, I’m not advocating an all-eggs-in-one-basket approach. Diversification is still a necessary value to uphold. If you’re invested in real estate but not multi-family, then I’d suggest that multi-family RECF is a great place to move some of your assets.
RECF Offers Lower Fees and Ongoing Income
Another benefit to real estate crowdfunding is lower fees. If you invest using traditional financial services or financial advisors, the fees will cut into your earnings. By investing in multi-family RECF, you’ll increase your chance of better returns while decreasing your administrative fees.
Plus, multi-family RECF offers another benefit: Ongoing dividends. Remember, this is a rental market. By investing in multi-family housing you can reap the ongoing rewards of monthly dividends, which you can then re- invest. Therefore, you get the dual benefit of equity and growth. And it’s easier to grow your portfolio over a shorter period of time if you invest in multi- family.
Bottom line: Multi-family RECF combines the benefits of RECF with the benefits of multi-family real.