Because of the pandemic that our country is still dealing with, we’ve seen some really bizarre stuff in the stock market, from dropping thousands of points and triggering “circuit breakers,” to Motley Fool issuing a rare “double down” buy alert, to posting back-to-back rallies—all within a span of about 10 days.
If you’re an adrenaline junkie or an investor, you’re probably gasping for air right about now. And maybe you’re even thinking, “what am I supposed to be doing with my investments with all of this going on?” Economic forecasters think that Wall Street is overreacting and could create an unnecessary financial crisis all on its own. (University of California Riverside Center for Economic Forecasting and Development.) Their prediction is that we very likely could avoid a recession even though UCR predicts a slowing in home sales and in business formations. After a negative growth in the second quarter 2020, they think the economy should rebound in the third quarter. However, forecasters caution that if the COVID-19 virus spread increases or grows exponentially, then the economy will likely slip into a recession.
If you’d like to slow down a bit and breathe a little more slowly after the craziness of the stock market, we have something for you: the “Plexes,” as in duplexes, triplexes and fourplexes. Investing in the Plexes makes a lot of sense right now and here’s why we suggest it.
This real estate asset class is basically a recession-resistant investment that greatly enhances your portfolio and helps to even out the roller-coaster ride you can sometimes find in the stock market. Although single-family homes will always be around, not everyone can afford to buy, or to invest in them. At the other end of the scale are apartment multiplexes and high-rises which are not for the beginner investor, or sometimes, not even for the experienced investor.
Housing permits have trended lower ever since the first quarter of 2018—this trend includes multi-family assets, and it will put upward pressure on housing prices. On top of that is the national housing shortage and what is being done to assuage that pinch. Hence, the allure of the Plexes.
A duplex, triplex or fourplex is a building designed for multiple families. To qualify as a plex, each must have its own entrance, kitchen, bathroom and utility meters. All the units must share a common roof and have communing walls between the units. Even though this is considered multi-family real estate, the property will still qualify for a residential real estate loan (five or more units requires the investor to obtain a commercial real estate loan).
The advantages of owning a plex—whether duplex, triplex or fourplex—is found in tax deductions, combined maintenance costs, ease of entry into the market, and if anything goes wrong, you have a place to live. For residents, the benefits over apartment buildings include increased privacy, a garage, and maybe a yard. On the flip side, Plexes usually do not offer the same community amenities that apartments do, such as gym rooms or pools.
A notable trend in where people want to live shows that 46% of baby boomers and 56% of millennials want to live in more “walkable” mixed-use neighborhoods. They are searching for denser, more diverse neighborhoods, meaning multi-family assets have a role to play in the new neighborhood schemes.
In an effort to ease the housing shortage in California, Democratic Senator Scott Wiener has introduced SB902. This senate bill would allow denser, multi-family homes built next to single-family homes and would remove the single-family-only zoning laws throughout the state. It’s met with lots of opposition, and a “gentler” approach is being offered whereby municipalities are no longer mandated to change the zoning laws but would simply be allowed to change their own zoning laws.
For example, right now building a duplex in a town of less than 10,000 is illegal. SB902 would allow for towns and cities to build duplexes in those towns, and triplexes in towns of 10,000 to 50,000 and fourplexes in towns when the population is over 50,000. Minneapolis and the state of Oregon are already doing this to encourage infill buildings that address the dire shortage of housing.
So, if the zoning laws could change to encourage it; if the housing shortage is waiting for it; if your potential clients are demanding this kind of housing; if it seems that housing prices will increase across the board; if all the arguments seem to be in favor of it, then doesn’t investing in a plex make a whole lot of sense to you?
One more tidbit of information to consider is that Paradyme Investments is doing this kind of funding already. You could very easily join in a group of investors who are putting their money in multi-family assets even as the stock market is taking your breath away and causing you to wonder what will happen next week. You don’t have to do this alone! Just call us, and we’ll help!
