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NEW YORK CITY- Small multifamily assets with 5 to 50 units and under a $10 million sales price could solve the country's affordable housing crisis. And not only do end-users desire the asset type, but a diverse range of investors view it as a sustainable investment amid shifting market fundamentals and operational changes.

Driving this trend from an investor and end-user perspective are the evolving needs of Millennials as they age-up and start families, and investors, who are moving into the small multifamily asset class to stock their portfolios with the deemed recession-proof offering, industry players tell GlobeSt.com.

Small multifamily investment sales are on track to exceed the 2016-2018 annual average of $12.8 billion in investment volume, making it the second consecutive strongest year for small asset investment volume. Thus far, H1 2019 total sales reached $6.4 billion and will continue to increase because of low-interest rates, and attributable to healthy property market fundamentals, investors' search for new investment opportunities, new buyers entering the market and attractive financing options, according to CBRE data.

Demand for data highlighting investment opportunities for small multifamily properties is growing, buoyed by investor interest and the need for affordable housing. Arbor Realty Trust Inc., a real estate investment trust headquartered in Uniondale, N.Y., and Chandan Economics have recently partnered to meet that demand.

The Arbor Small Multifamily Price Index measures price appreciation on small multifamily properties, comparing model estimates of rents and multifamily cap rates, and highlights information about which are affordable.

"The overall goal is to provide more opportunities to the market and enhance liquidity," said Sam Chandan, founder at Chandan Economics. "We're flex on location and flex on amenity set and thinking about real challenges to affordability that working families face."

Older Millennials starting families place great value on affordable housing. One reason is that it allows families flexibility to relocate near quality public schools, which "is as a big demand driver and complements the affordable nature of renting a small asset," Chandan said.

In addition to end-user demand, investors – regardless of investing in small multifamily assets in service of affordable housing – view the properties as a recession-proof investment. "The cash flow is positive and affordable for people in a good bad and ugly economy," said Oliver Somoza, CEO of Turnkey Property Pro.

Price sensitivity, given the broader affordability landscape and the properties' size, also makes small multifamily assets accessible and operationally manageable, which is attractive in underwriting, and also offers peace of mind because ownership can account for paid property expenses and immunity from rising interest rates, Somoza added.

Instant Insights /

Small Multifamily Properties Offer Affordable Housing Investment Opportunities

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