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How Much Risk Am I Taking?

I get this question all the time from potential investors: “How much risk am I taking?” Here’s what I tell them.

Workforce housing is the best risk-adjusted return of all the real estate asset classes. Also, the market for affordable workforce housing is always in demand.

Why Invest in Workforce Housing?

There will always be a substantial percentage of the population that needs a nice place to rent. Investing in workforce housing dramatically reduces the risk of the asset versus renting to businesses or renting to companies.

Investors also ask me about owning large apartment complexes versus owning a couple of rental properties. In a large complex, you get all the same advantages as if you own a rental property by yourself. You get so much greater economies of scale. In small deals, however, if something goes wrong, it can move the cashflow needle quite a bit.

Workforce Housing Investment Advantages

In a large project, there are more units to even out those bumps in the road. You also have the advantage of utilizing employees (office and maintenance usually) that are on-site daily beholden to just that asset. Instead of relying on yourself, you have an entire pre-built ecosystem to keep an eye on your investment. Small, scattered rental properties can be much riskier.

Still not convinced? Let’s talk about interest rates. Multifamily is the only asset class out of all real estate where you can get debt locked in for 10, 15, and in some cases, 35 and 40 years. This longer time frame takes an enormous amount of risk off the table.

Watch my video on this topic here.

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