Why Small Apartment Buildings Make Great Investments
One of the best commercial real estate investments that you can make is in long-term rentals. Commercial, industrial and residential space can all deliver significant returns if you can keep them occupied. However, residential tends to be among the best options because people always need a place to live. In particular, small apartment buildings are great choices.
Small Buildings Attract Movers
Overall, there are fewer people moving homes than in the past. On the one hand, this means that when you fill an apartment, it is more likely that you will have people staying there long-term. However, it can also make filling vacancies more challenging.
People are tending to move to smaller buildings (those with fewer units). This tends to offer a different living experience compared to much larger units. Notably, smaller buildings tend to have more space per unit than larger buildings. However, they lack some of the community amenities available with bigger properties.
Reasons People Move To Small Buildings
There is a wide variety of reasons that people decide to move into a new apartment. These reasons can vary significantly based on the size of the building. The following are some of the most common reasons:
- To be close to a new job
- To get space for starting a family
- To live closer to family
- To reduce commute time
- To have a better home
- To reduce housing costs
- To live in a better area
The most significant reason for people moving into smaller apartment buildings is to get space for a family. This is likely because many smaller buildings are houses that have been converted into apartments. These may offer a floor or half a floor to each apartment. Conversely, large buildings are incentivized to fit as many apartments as they reasonably can on each floor.
For people moving into larger apartment buildings, the most significant reason is to live in a better area (this is also a popular reason for small building tenants). Living in a better home is a top choice also.
These factors can be instructive for real estate investors. If you can offer tenants a nice living experience in a good area, they are likely to want to live in your building. Small buildings should be optimized for space whereas large buildings should offer community amenities.
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