Multifamily Units on the Rise in Minnesota - Should You Invest?

Posted by Kris Lindahl on Thursday, October 19th, 2017 at 8:30am.

The Investment Benefits of Buying a Multifamily HomeIn Minneapolis and St. Paul, it's hard to walk the lengthy of a city block without spotting some type of new housing development. Residential housing construction is on the rise, and this boom includes not only single-family residential properties but also commercial real estate. According to the Star Tribune, 33 permits were issued to developers who intended to build multifamily units. Those 33 permits will amount to 334 new multifamily units within the Twin Cities—a steep increase of about 32 percent from this same time last year.

Multifamily units are a viable option for many commercial real estate investors, particularly in markets where this type of housing is in high demand. In Minneapolis and St. Paul, the housing market has become competitive due to low inventory levels—a symptom that is presenting itself in many powerful markets across the country. This has forced some would-be buyers to stick with rentals for the time being, ultimately increasing the demand for apartments, condominiums and town homes in the region. The article notes that more than half of all new units in the city were apartments, indicating a need for multifamily housing in the area.

Should You Invest in Multifamily Housing Units in Minneapolis and St. Paul?

When it comes to investing in commercial real estate, multifamily units are an ideal option for those who want to enjoy significant returns and steady income. Here's a few reasons to consider investing in multifamily units in the Twin Cities.

  • Multifamily units have more financing options. For newcomers to commercial real estate, a multifamily unit might feel like an investment that is too large to swallow. While one single-family home may be hundreds of thousands of dollars, a multifamily property may be upwards of $1 million or more. This can be an intimidating price tag, but it's important to recognize that many lenders are more willing to offer financing for these types of properties. This is due to the fact that multifamily units are more likely to generate reliable monthly income for property owners, and they also offer faster returns on the original investment. They may come with a high price tag, but they are actually a great option for first-time commercial real estate investors.
  • Multifamily units provide a reliable way to grow a commercial real estate investment portfolio. Many commercial investors aspire to have multiple commercial units within their investment portfolio. When focusing on single-family homes, it can take a long time to develop a well-rounded and diverse investment portfolio. However, when you purchase a multifamily unit, you automatically acquire a significant number of properties that can be included in your portfolio. This helps you accrue wealth as well as establish credibility as a commercial real estate investor.
  • Multifamily units are more convenient to manage. Many commercial real estate investors also take on the title of property manager. Whether you are renting single-family units or apartments within a multi-family unit, you are required to maintain your properties, respond to resident inquiries and deal with unforeseen circumstances. When you own a multi-family property and rent out the individual units within it, the management of your property is significantly simpler. You no longer have to respond to multiple inquiries in different parts of town. Rather, you can head to your one property that is in the heart of Minneapolis and take care of everything that needs to be done at once. It's better for you as a commercial real estate investor, but it's also better for the residents who call your units home. In the event that you are searching for a property management firm, you also will find that they prefer to take on multifamily units as well.
  • Multifamily units can come with some enjoyable tax breaks. Beyond the fact that multi-family units can generate more cash and allow you to enjoy investment returns more quickly than single-family units, there's also tax benefits to consider. Many communities across the country appreciate it when investors come in and provide more housing options for the residents, specifically affordable housing in multifamily units. There are often tax breaks and tax incentives available to commercial real estate investors who focus on multifamily units. Contact a Certified Public Accountant in Minnesota to find out which types of tax incentives your real estate investment might qualify for.

Investing in commercial real estate requires you to identify the right type of property for the current economic conditions. Right now, in Minneapolis and St. Paul, all signs point to multifamily housing units. Building permits are on the rise, vacancy rates are low and there's a demand for affordable housing. To find out more information on investing in commercial real estate in Minnesota, contact a qualified commercial real estate agent today.

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