If you’ve ever read an article, heard a story or listened to a podcast about people building wealth and how they got there, you’ve heard many attribute their successes through owning investment real estate. Recent years of unpredictable stock markets have pushed people to seeing value in investing in tangible property, specifically multi-family real estate. Right now, California’s multi-family market is booming, so it may just be your time to get involved.
In Southern California, a new survey reports that 75% of respondents are planning new multifamily projects, an increase of 11% from the previous year. This skyrocketing of the market can be attributed to rising rental rates and high projected occupancy rates through 2021.
The first factor incentivizing multifamily ownership over single-family is the huge demand for housing. Developers are constructing and planning projects to keep up with renters as the MetroLink and improved infrastructure have made residential neighborhoods and Downtown LA more accessible than ever. Single-family homeownership is decreasing as younger renters look for modern buildings with more amenities and high-rises, both new and planned, are meeting that demand.
Recent tax reform has also pushed investors to get involved in multifamily properties, with California receiving the highest percentage tax reduction for businesses of all states. Most new economic activity will be focused where people live and work, both existing and new communities, including multifamily properties and office spaces. Tax reform not only gives a break to businesses, but offers fewer incentives for single-family ownership. With less motivation to own a home for tax reasons, it is predicted that there will be a larger renter population than ever before as fewer people choose to own.
The broader effects of tax reform supports job growth and income increases, which arms renters with additional money to afford these newer buildings and rising rents. With greater demand for rentals, more opportunities for investment, and ultimately, the chance to benefit from higher rents, this is a peak time to invest in multifamily real estate in Southern California.