Why Is Multi Family The Most Popular Commercial Real Estate Asset Class To Invest In For Private Investors?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful.

Multi-family commercial real estate is an asset that remains most popular for private investors for two reasons – it’s relatable and it’s available. Most investors at some point or another have lived in an apartment building or rented residential space throughout their lives, so they can relate to these properties on a personal level. Additionally, there are all sorts of multi-family properties out there for commercial investors no matter what exactly they’re looking for. 

Richard Wilson: I appreciate you bringing that up. Why is multi-family the most popular commercial real estate asset class, by far it seems, to invest in for private investors? I mean, to qualify that, I think a lot of people get a single family home, they move, they keep the old one as a rental and kind of by accident they become a small landlord. But in the commercial real estate realm, multi-family dominates it seems for the thirst of investor capital trying to flow in there. 

Brian Burke: It does and it’s natural. The reasons why are really natural when you think about it. Multi-family real estate is very familiar to people, most people have lived in an apartment building, and if you’ve never lived in an apartment building certainly you’ve lived in some kind of residential property. So residential real estate is familiar to people. The concepts of renting to someone to live in is very familiar to people. And for that reason, it’s very easy to believe in the concept. It’s also that there’s a lot of it available, and when you look at how many apartment units there are out there in the country versus how many small commercial properties are out there, there’s a lot of multi-family inventory to choose from that demands a lot of private capital. You don’t see a lot of private capital syndications for the Empire State Building, or any skyscraper high rise, it’s always done through rates and large institutional capital investors. The private capital space really focuses kind of on that call it $5 million to $100 million space, and that’s dominated by a lot of multi-family real estate and a lot of multi-family operators are out there raising private capital for those ventures. So, it’s familiar and it’s available.