As you delve into real estate investing, your initial thinking may be to offer luxury properties that will draw big bucks from tenants. And who could blame you?
One aspect of real estate investing you may be overlooking, though, is affordable housing. What is affordable housing? Contrary to how it may sound, this is an investment niche that could very well be your ticket to a stronger bottom line in the years ahead.
The demand for this type of public housing is on the rise, so it only makes sense to consider investing in these types of properties. Here’s a rundown on what investing in affordable housing involves and whether you should add it to your strategy.
What is Affordable Housing?
This unique real estate refers to properties that have relatively low monthly rents, or Class C properties. These properties include those erected via government-subsidized programs focused on providing housing for those who otherwise could not afford it.
Investing in affordable housing can benefit your portfolio, but it can also have a positive impact on the local community. When you invest in this type of housing, you’re helping families who may be struggling financially, and at the same time, you’re helping your bottom line.
Let’s take a look at some of the biggest reasons for pursuing this unique housing as a real estate investment.
Investing in Affordable Housing Offers Security
If you’re asking “What is affordable housing, and how can it help me,” a major draw of this property type is that it often produces steady, consistent rental property income. That’s because local, federal, and state agencies subsidize the rents of those who qualify for such housing.
On top of this, the United States government provides many tax credits and deductions for those offering affordable housing to families with owning extremely low income housing. These savings will no doubt help your bottom line.
In light of the above, it may come as no surprise to you that in many real estate markets, affordable-housing properties are completely occupied and are reliable performers. When you invest in them, you can expect a constant stream of income long term.
Investing in Affordable Housing Offers a Respectable Return on Your Investment
An affordable-housing property can usually be a safer investment compared with a Class A apartment building. That’s because the cost of the latter is climbing higher and higher, particularly in today’s coastal markets.
As a result, the return on investment for such premium apartment buildings is no longer greater than what you can achieve with the affordable-property niche.
Investing in Affordable Housing Will Lead to Numerous Tenants
The demand for affordable housing isn’t expected to drop anytime soon. After all, both tenants and multifamily property investors are becoming increasingly interested in this type of housing.
More tenants are looking for affordable housing because the growth of gross income has been slow in recent years. In addition, some families used to live in middle-market apartment rents years ago but can no longer afford them due to rent increases, so they’re turning to more affordable options.
Unfortunately, the current gap between poor and wealthy individuals in the United States only continues to grow wider. As a result, you can expect more people to transition from traditionally middle-class homes to more affordable housing in the years ahead.
Investing in Affordable Housing Means Less Competition for You
The great thing about purchasing affordable housing today is that you won’t have a lot of competition with other apartment owners.
Because the cost of developing an apartment building is now quite high. That means builders won’t create apartment buildings with low rents unless they receive assistance from a government-funded affordable-housing program. And these types of programs are limited in how much brand-new housing they may build.
So, instead of charging low rents in newly created apartments, investors are charging higher rents and offering luxury amenities and finishes. They can do this because institutional investors who have plenty of capital often back these types of property investments.
The takeaway here? The demand for affordable housing is growing, but the supply is far from keeping pace with it. And that’s great news for you. The reliable, strong, and stable demand for affordable housing easily makes this niche a low-risk one and thus a smart one for the modern real estate investor.
Investing in Affordable Housing Benefits Communities
Yes, you’re in the real estate business to grow your net worth. But in the process, you can grow much more than that. You can grow local communities, and this benefit is priceless.
When you create a housing option for a senior citizen or a family who otherwise couldn’t afford housing, you can have a positive impact on many people’s lives. You’re offering tangible help to other people, and these individuals often pay it forward by adding value to their local communities in a number of unanticipated ways.
Important Considerations When Investing in Affordable Housing
When you own affordable housing, you’re restricted from increasing your rental rates. This means that your success as a property owner is contingent on how well you manage your controllable expenses with the help of your tenants.
So, as a landlord, you must empower your tenants to treat their homes with pride, rather than simply allowing them to wear out. For instance, you can communicate your specific expectations when it comes to keeping the apartments clean. And you can regularly perform inspections of the apartments. All in all, investing in an affordable-housing property requires not only a financial investment but also a social investment on your part if you want to succeed.
Start Investing in Affordable Housing Today!
If you’re asking the question “What is affordable housing,” now couldn’t be a better time to begin exploring the benefits of this type of investment. With the right approach, you can make an affordable-housing property your next lucrative investment.
The good news is that you don’t have to learn about and try to capitalize on affordable housing on your own. Get in touch with me, Joe Fairless, to learn how to tap into the many benefits of investing in affordable housing today.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.