4 (Obvious) Reasons Rents Will Be Higher In 10 Years

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Have you been wondering if now is a good time to invest in real estate? Will apartments be worth more in 10 years?

Don’t worry, you are not alone!

Many people who are putting their money into multi-family deals are wondering the same things. They don’t want to miss out on a better opportunity.

That is why this is such a great question. It makes you ask, “Is my investment a good one? Will my investment keep its value?”

These are all valid concerns, but hopefully, multi-family apartments will do extremely well in the next 10 years. Here’s why.

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More stability

The big difference between multi and single-family homes is how you make your gains.

Single-family investing is based on a lot of speculation. The price of homes fluctuates year to year based on what people are willing to pay for the property and the market cycle.

Things go up. But things also go down.

Multi-family, on the other hand, is more stable. It is based on both the value of the property and the rents. If you can increase the property’s value or increase rents, you will have higher profits.

This is why multi-family is often superior to single-family.

You can more easily control the cap rate of a multi-family property. By finding ways to increase the value of the property, rents will increase.

And that is a simple equation.

Rents rising = increase in value.

Demographic changes

I recently discovered this interesting non-profit called We Are Apartments.

They have accumulated data from all across the U.S. and predict that there will need to be 4.6 million more apartment units by 2030.

That’s a lot of units. And that’s a whole lot of investment opportunities, but you need to pay attention to where you are investing.

One of the reasons behind the need for all these units is that the demographics of the U.S. are shifting. People are moving out of big cities like New York, Los Angeles, and San Francisco. These same people are then moving to places like Atlanta, Denver, and Salt Lake City.

On top of this, many people are moving away from the suburbs and rural areas and moving into apartments in these up-and-coming cities.

This means a whole lot of new tenants moving in, and a whole lot more money to be made.

The Fed is printing money

Since the 2008 recession, there is now 2.5 times more currency in circulation.

This means the Federal Reserve has been printing so much money that there is more than twice the amount of money in circulation now than there was just over a decade ago.

This comes from the major deficit spending on both political sides without much fiscal responsibility. Not saying that this is right or wrong, just that there is a lot of money being printed.

And looking at our current and future COVID-19 spending, this will only continue.

Great, the government is printing money. What does that mean for my investments?

Well, the more money in circulation, the higher prices for everything.

Yep, I can tell you are ahead of me. This is inflation. But just because your coffee doesn’t cost you a quarter anymore doesn’t mean you can’t profit from inflation.

When you have a real, physical asset like multi-family apartments, it usually rises in value alongside inflation. Meaning, as the prices of goods go up, so does the value of your investment.

Construction costs are increasing

But that is not the only way that inflation will affect your investment.

Under inflation, goods cost more and services cost more. Therefore, anything you build is going to cost more.

In fact, this is already happening. According to Associated Builders and Contractors analysis of BLS data, softwoods pricing has increased 73% in the past 12 months, and iron and steel have increased 15%.

This means that getting into a deal now will only make your investment more valuable in the future.

Looking at the combination of these factors, you can see how compelling real assets like multi-family apartments are. They’re only going to grow.

There is this old saying that I love: The best time to plant a tree is 20 years ago. The second-best time to plant a tree is today.

Take action today and find opportunities to invest in deals instead of letting time pass you by. Look into opportunities to invest or find ways to educate yourself on the many benefits of multi-family investing.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.