Multifamily Investors Are Lengthening Their Hold Periods

Multifamily investors are lengthening their hold periods, according to a recent report from WealthManagement.com.

The report cites multiple factors that are coinciding to make the typical multifamily investor’s holding period longer:

• A growing recognition that wealth in real estate is often built with a buy-and-hold strategy, rather than a “flipper” strategy;
• A dearth of attractively-priced multifamily assets currently listed on the market, making existing owned-properties relatively more attractive to hold;
• Growing demand for multifamily housing in many cities, in the context of a nationwide housing shortage;
• And last but not least, recent CPI prints in excess of 6 percent, and anticipation that higher inflation will sustain itself in 2022.

Multifamily real estate has historically performed well during time periods of higher inflation, according to OpportunityDb analyst Andy Hagans. “A lot of investors want to park their capital in an asset class that has more return potential than the current bond market,” said Hagans. “Multifamily has historically posted attractive returns, and moreover it has done so even in decades when inflation was higher.”

But some of the pressure that’s extending holding periods may be “wrapper-driven,” according to Hagans. “With a wrapper like a Qualified Opportunity Fund, investors have to park their money for ten years to get the maximum tax benefit. So they’re already going into the investment with a long term mindset,” he said.

Given the drivers of the longer holding periods, including inflation and an attractive “demand-to-supply” ratio, it’s likely to be an investment trend that continues into 2022 and beyond.