I’ve Been an Entrepreneur Since the ’90s—And I Think I’ve Finally Found the Perfect Investment. Hear Me Out.

by | BiggerPockets.com

So, I admit it. I’m addicted. Have been for decades. But I didn’t start out that way.

My entrepreneurial addiction started around 1990 in a cubicle at Ford Motor Company in Dearborn, Michigan. I had recently graduated with an engineering degree and an MBA. Like most of my classmates, I took the corporate route.

I don’t even remember meeting an entrepreneur before that, but as I pined away in my cubicle, it sure sounded good. How many times could I rearrange my desk while I looked for something meaningful to do?

My friend Barry and I met at restaurants after work to discuss our fates. We schemed about starting an oil change shop in Farmington Hills or a property tax consulting firm. He had a great job—he was the controller on the Ford Taurus. But he knew his future was elsewhere.

I actually liked Ford. But the entrepreneurial bug had bitten, and I had bigger dreams.

I don’t want to bore you (it may be too late to avoid that already), so I’ll fast forward through the next two decades quickly.

We both left Ford and started a human resources outsourcing firm. I was finalist for Michigan Entrepreneur of the Year twice, and we eventually sold the company to a publicly traded firm.

On the side, during those years, we started two or three other businesses related to our core HR service. One survived a few years after our sale, but we eventually sold that business, too.

I moved my family to the Blue Ridge Mountains of Southwest Virginia and considered myself semi-retired.


I quickly got bored and joined a friend to flip houses. Then we started marketing them rent-to-own.

Then I started building modular homes. Then a stick built home. I tried a niche of selling brand new homes with lease-to-own financing. (That was a big fail.)

Then I set up a firm to buy and flip expensive waterfront lots. And I developed a subdivision.

I got into online marketing and set up a firm to generate leads for real estate agents selling lakefront residential properties.

When real estate was in the tank, I learned the trade of copywriting and wrote marketing letters on contract for three other companies. And I wrote the first of two real estate books.

And then there was the wireless internet company we started, a cost segregation analysis gig I did for commercial property owners, the oil and gas investment firm I was involved with in North Dakota, and the Hyatt hotel my partner headed up.

Makes you tired just hearing this list, huh? You can imagine how tired I was.

My business partner has a small jet. In 2011, when he was flying to North Dakota frequently to check out oil investments, we realized they had a critical housing shortage. Guys were sleeping on the roadside in their pickups or living in flimsy RVs in the 40-below winter.

We were both involved in real estate, so we grabbed the opportunity to buy 80 acres in an un-zoned area along a main road. Within a short time, we built a multifamily facility with over 100 doors. We knew nothing about the business, had never heard of a rent roll, and initially managed it using Excel.

There’s a benefit to being at the right place at the right time. We rented these nice little 300 square-foot efficiencies for $3,900 a month and kept them mostly full. These were fully furnished with all utilities, and the oil companies were more than happy to pay our $13 per square foot rates. We managed this facility for a few years and made a lot of money.

Sensing too much competition on the horizon, we sold this asset while oil prices were near their peak.

In retrospect, this was an incredibly risky venture. We only realized the risk with the clarity of hindsight.

I considered buying another apartment building in my hometown. While I was researching this, I learned about the boom in the multifamily investment world—a boom that hasn’t slowed down to this day.

Was this a catchy fad that would fade like Chia Pets or bell-bottom jeans? Was this a cyclical business like oil and gas, which you had to time perfectly to make a profit? Was this something mysterious or confusing, like semi-boneless ham? (Does it have a bone or not? No one has answered this question and I’m still wondering.)

I went on a mission to learn all I could about multifamily investing.

And I discovered why multifamily isn’t a fad. It isn’t cyclical. It boasts fundamentals that are predictable for decades in advance. And I believe that it is a multi-generational wealth creation vehicle that will impact my children’s children.

So why do I say this?

I could tell you about the leveraged returns. The stability and safety of this asset class. The stunning tax advantages. And much more.

I may discuss these issues in the future, but today I want to discuss the demographics driving this amazing asset class that I’ve determined to invest the rest of my time, talent, and other resources into. I want to tell you about the demographics driving the perfect investment.

Demographic Trends Driving the Explosive Growth in Multifamily Investing

Vanderbilt. Rockefeller. Carnegie. Gates. Buffet.

Household names. These legendary moguls were able to read demographic trends and apply the technology of their day to provide solutions that resulted in extreme wealth—wealth that would transcend generations, products and wealth that would benefit millions around the world.

While I was researching apartments, I looked over my life. Where had I succeeded? Where had I failed? What aspects of these business ventures did I want to replicate? Which ones did I want to run from?

Related: What Are the Best Real Estate Investments? How to Find the Ideal Place to Put Your Money

And what business and/or investment class would be a fit for my goals? I realized that the boom or bust cycle that most entrepreneurs operated on was not something that I wanted to continue through the last half of my life. I wanted to invest in an asset class that was safe, stable, predictable, evergreen, and based on strong and long trends that had nothing to do with a war in the Middle East, the latest technology breakthrough, or the mood on Wall Street this month.

I wanted something with demographic trends that would last the rest of my lifetime and likely through my children’s.

Now that’s a tall order.

In the last decade, when new horizontal drilling technologies opened up a wild increase in the ability to extract oil from hard-to-access rock, places like the Bakken oil fields of North Dakota exploded. Posted job openings exceeded 18,000, and thousands slept in their trucks or set up tents in this harsh environment.

I saw it firsthand. Hotels, motels, man-camps, RV parks, condos, townhomes and apartments popped up all over the plains. It was literally amazing to watch former prairie towns like Watford City go from 2,000 to about 10,000 almost overnight.

Some North Dakotans recalled the ’50s boom and bust cycle, and they warned about what could happen. More remembered a similar cycle in the early ’80s.

But North Dakota had rocketed past California and Alaska to become the second-highest oil producing state, and the press and many well-meaning bloggers proclaimed:

“This is Not a Boom… This is an Industry!”

So everyone “knew” that oil prices wouldn’t retreat below the recent range of $80 to $100 per barrel, right? And most of the developers who poured millions into real estate there ignored the simple laws of supply and demand (both for oil production and real estate availability), as well as the lack of diversity of the economy, as well as… well, you get the picture.

There were 18,000 job openings, so if we build it, they will come.

Yeah right. You probably know the rest of the story. It didn’t end well for most of these developers.

Anyway, I was 50 and certain I wanted to stop swinging for the fences. I was eager to find something stable and profitable. I wanted something I could count on for decades and beyond. Something I could teach my children. Something that would give them some of the same opportunities I’ve been blessed with, but without the painful learning curve that I (and most entrepreneurs I know) endured.

I found that opportunity in commercial multifamily investing. And the strength and length of demographic trends are one of the most important factors that caused me to invest my time, talent, and resources into this space.

I’m not alone. The national press has been buzzing about multifamily investing for the past several years. A steady stream of headlines tell the tale:

So what are the demographic trends that have caused the significant growth in multifamily investing? As you review these, please note both the strength and the length of these trends. They’re not going away any time soon, and in fact, they appear to be increasing.

The Big Picture

Rental housing in general is synced to one obvious key driver: the number of renter households. As the number of renters in the nation, a market, or a submarket increase, the multifamily business becomes more profitable and attractive.

You may say, “Yeah, like North Dakota, right? What happens when millions of new units are built? And renting goes out of style again?”

Great point, reader!  Those are the types of questions I was asking when I entered this space. Hang with me.

According to John Burns Consulting, new renter households were forming at 7.7 times the rate of new construction from 2010 through at least 2015. Think about it. During the same years that people were losing their homes to foreclosure (and therefore moving into rentals). Their average wages were dropping, and credit markets were tightening for all new construction, which included multifamily.

This caused a significant new apartment supply and demand imbalance. Since most everyone who can afford it prefers newer and nicer, this imbalance obviously trickled straight down from new properties to existing ones, and owners have been scrambling to update their units and raise their rents.

That has trickled down further into older, uglier properties, single family homes, condos, and more. The multifamily industry has expanded rapidly.

This imbalance is partially due to the increase in U.S. population for sure. But that’s not all, because…

Home Ownership is Significantly Declining in the United States

When I was first introduced to this stat, I was suspicious. Is this a temporary setback in homeownership? Strictly a result of the recession? That played a role, but if you look at the long-term trend, it is simply returning to more of a norm after a decade-long failed experiment in government tampering from 1995 to 2005.

You see, in the mid-90s, the federal government, in its great wisdom, thought it best that many more of its citizens stop renting and fulfill the American Dream of homeownership.

So they passed legislation that significantly lowered the bar for people with marginal credit, no savings, and lower wages to buy a home, sometimes a very nice home.

You remember ARMs, stated income, and no-doc programs, right? “Just write down whatever you want on the loan app, and we won’t even check it. Congratulations on your new home!”

I know someone who earned about $50k per year who bought a 7,000 square-foot old mansion for $600,000. As a second home!

His plan was to get cash back from seller at closing, invest that cash in a trading system he studied, then use the profits from trading to fund his mortgage payments. He didn’t have the home for long till the bank got it back.

Needless to say, once folks started—then stopped—making payments, it caused a bad situation. Then the economy slowed, incomes dropped, and home values plummeted.

Millions who had qualified for then purchased homes lost their homes and returned to the renter pool. (This includes the guy with the second mansion, he not only lost the mansion, but was forced to ditch his family’s primary home, and they moved to a two-bedroom apartment.) Home ownership normalized again, and, of course, the government blamed those mean bankers.

The homeownership rate, which peaked above 69% in 2005, has returned to a more normal rate around 63%. And it continues to drop. Check out this graph.

Note that every 1% decline in the homeownership rate translates to about a million new renters. Will we eventually be like Germany, with home ownership rates in the 40-50% range?

Also consider that this historical snapshot demonstrates another fact I really like about multifamily investing: It is counter-cyclical. It has a built-in buffering feature in down economies.

While there was certainly downward pressure on rents in the 2009-2012 era, that pressure was offset by the fact that millions of former homeowners had suddenly become renters. The multifamily business did not suffer to the degree of the housing market in general. And it recovered far more quickly.

The national default rate on multifamily loans is very low. If you take out the four sand states (CA, NV, AZ, FL) with the largest boom-bust cycles, the default rate drops even more. The rate is even lower in stable markets with balanced supply and demand. Top operators with good property managers do much better than this.

Related: 5 Darker Aspects of Entrepreneurship You Need to Accept Before Taking the Plunge

Check out the following graphic showing serious delinquency rates from the Housing Finance Policy Center’s 2015 chart book. As you can see, the Freddie Mac delinquencies (60 days late on mortgage payments) peaked for single family homes at about 4% in late 2009. (FHA loan delinquencies actually hit about 9%.) About the same time, Freddie Mac’s multifamily delinquency rates peaked at only about 0.4%.

At the time of this report, Freddie Mac residential delinquency rates were just below 2%. At the same time, multifamily delinquencies sat at a mere 0.03 to 0.05%.

So the multifamily delinquency rate, at its peak, was 90% lower than the residential rate in the worst downturn since the Great Depression. Then it retreated further to about 98% lower than the residential delinquency rate by early 2015. Did you catch that? Another reason to love the multifamily sector!

Check it out:

Note that the high foreclosure rate on single family homes was in spite of government intervention trying to save homeowners from foreclosure. A benefit not necessarily afforded to commercial property owners.  Here is a quote from Freddie Mac’s Multifamily Research Perspectives 2012, in the midst of the recession:

“The percentage of loans in foreclosure proceedings can be used as a measure of single-family housing market conditions. Based on MBA’s (Mortgage Bankers Association) National Delinquency Survey, the foreclosure rate has skyrocketed from around 1% in late 2005 to a historical high of 4.6% by 2010; since then it has decreased from the peak but is still at an elevated level of 4.3%. Foreclosures increase both the supply of housing available and the demand for housing. Even with economic growth we do not expect a rapid decline of the foreclosure rate. Over the past several years, the pipeline of non-performing mortgages to be resolved has become large. In addition to various government efforts to reduce distressed sales, delayed bank repossessions, legal issues, property maintenance, and other issues continue to complicate and slow down the current foreclosure process. There are still 1.4 million foreclosures in process and an even higher number of underwater mortgages (11 million) according to the CoreLogic 2012 May Foreclosure Report. Generally, a higher foreclosure rate is an indicator of a weaker homeownership market. We expect high foreclosure volumes to continue.”

I was impressed with all of these statistics, but I was curious. Why? What has driven this spike, and why should I believe it would continue? To answer that, we need to look at the fundamentals driving this trend. I will review several here.

Multifamily Demographic Driver #1: Baby Boomers Are Flocking to Rental Housing

The Baby Boomers are the nation’s second largest demographic group ever. This group consists of individuals born between 1946 and about 1964.

As of the 2010 US Census, about 77 million baby boomers were alive and kicking. Dramatically increasing lifespans mean that this group will play a major role in the economy for many years to come.

“But don’t Boomers typically own their homes?”

Not as much as you may think. For a variety of reasons, Boomers have been selling (or losing) their homes and renting. Polls and stats say that, on average, when they return to renting, they never buy again.

Wealthier Baby Boomers Shun Homeownership

Excerpts from CNBC article: “The U.S. home ownership rate is at the lowest level in 25 years and is widely expected to go even lower. That’s not just the result of younger Americans struggling to make ends meet to save for a down payment… It is increasingly the result of middle-aged, higher income Americans choosing to rent.

Renter growth is now at the highest level in 30 years, and families or married couples ages 45–64 accounted for about twice the share of renter growth as households under age 35, according to a new study by the Joint Center for Housing Studies at Harvard University. In addition, households in the top half of the income distribution, although generally more likely to own, contributed 43 percent of the growth in renters.

Duncan pointed to demographics. Baby boomers are now moving out of their homeownership years, while Generation X, a smaller group by 6 million to 7 million, also has a growing preference to rent after being hit hard during the recession, losing income, credit and even their homes.

Because of that, rental apartment occupancy is now at an all-time high, and rents are rising at twice the pace of inflation. In turn, that is putting pressure on renters young and old, but not necessarily pushing them to homeownership. Higher rents mean it is more difficult to save for a down payment.”

Source: CNBC

Multifamily Demographic Driver #2: Millennials Are Choosing or Being Forced into Rental Housing

Millennials now top the Baby Boomers at about 80 million strong. This is the census block group born in the ’80s and ’90s, also called Generation Y or Echo Boomers.

This group makes up the bulk of recent new household formation, and their propensity to buy homes is surprisingly low. While new U.S. households have typically bought versus rented at a 65/35 ratio, the past several years have seen a striking reversal: New households are now owning versus renting at a 25/75 ratio.

“Since 2005, an average of 804,000 new renter households per year have been created compared to just 75,000 per year from 1990 to 2004. That’s a stunning annual increase of 1,040%, inverting the ratio of homeowner/rental household formation to 25/75 from its historic ratio of 65/35.”

HUD & US Census

Related: 4 Ways Technology is Shaking Up Commercial Real Estate (& Why Multifamily Will Pull Ahead)
Echo Boomers are largely disenfranchised with the concept of homeownership. They’ve watched their friends and parents lose their homes in the recent recession. After many grew up believing a home was the cornerstone of their investment portfolio, they watched this “fact” dissolve into a myth before their very eyes.

Gen Y-ers want a more flexible lifestyle. They are less likely to stay in one job, one home, or one city. Why lock oneself into a 30-year contract to a seemingly overpriced home and forego the flexibility to pick and move for a better job or new friends next year? Access to public transportation is better from many multifamily properties, and even a car means insurance, repairs, gridlocked traffic, and environmental consequences.

A study by GoBankingRates found that “62% of Americans have less than $1,000 in their savings accounts and a third of those under-savers have no savings account at all. The most frequently selected amount that people say they have in savings is zero. 28% selected this answer. Even worse, the next-most-common answer is ‘I don’t have a savings account,’ selected by one in five people (20.7%).”

Millennials also carry a record debt load. Student debt is at an alarming level, and this generation doesn’t appear to place a big value on saving up money. This would have mattered little in purchasing a home a decade ago, but the crash has tightened lending restrictions back toward the historical norm. Nevertheless, this generation’s saving and debt trends are anything but the norm.

Why Millennials Love Renting

Excerpts from Forbes article:

“With Millennials facing an unemployment rate of more than 8% and $1 trillion in student loan debt, they’re increasingly renting instead of buying homes. In fact, the true home ownership rate for 18-34 year-olds has fallen to a new low: 13.2%. But finances aren’t the only reason for the dip in homeownership. Millennials are recognizing the many benefits of renting — including reasons that have nothing to do with money.”

The article goes on to detail benefits in the following categories:

  1. Love of Amenities
  2. Love of Community
  3. Love of Flexibility
  4. Love of Convenience

“The ultimate benefit of renting may arise from the flexibility of leaving for any reason, especially career reasons. Millennials tend to change jobs three times more often than their older counterparts and stay with the same employer for just three years on average, according to the U.S. Bureau of Labor Statistics. Renting instead of buying makes transferring to a new or better job much simpler. Some leases may even include a termination clause that specifies acceptable reasons for early termination, such as a job transfer that is more than 50 miles away. In some cases, the tenant may not be liable for any payment if the unit is re-rented within a particular time period.”

Multifamily Demographic Driver #3: U.S. Immigration Continues to Grow

As a group, U.S. immigrants, regardless of source location or socioeconomics, rent more often than they own and rent for longer periods of time.

A Harvard housing study said, “About half of all immigrants are renters, including 74 percent of those under age 35.”

Check out this graph showing the effect that immigration is having on the U.S. population. Assuming that immigrants continue to prefer renting at a higher percentage than non-immigrants, it will be hard to overestimate the impact of this powerful driver.

The Access of Immigrants to the Homeownership Market

This study states, “Immigrants can also have a lower access to the housing and credit markets. They lack information on these markets and they may suffer from discrimination affecting not only the screening of housing units but also the type of mortgage and insurance made available to them. Even if some immigrants access homeownership, they may be more vulnerable to adverse economic shocks that could make them default on their mortgage and force them to resell their dwelling.

…staying in the rental sector can be a choice for some immigrants who prefer to make financial transfers to their family in their home country or accumulate wealth to purchase a dwelling in their home country after return migration.”

Via: Voxeu

Conclusion: This is Big. Really Big.

I was thoroughly convinced by the demographics that the multifamily business had a sound future. The numbers show a strength and undeniable length that should go on long after my lifetime.

I was now a serial entrepreneur converted to a multifamily investor and syndicator. I would never go back.

[Editor’s Note: We are republishing this article to help out our newer readers.]

So how about you? Are you convinced?

Feel free to agree or disagree—let me know your thoughts below!

About Author

Paul Moore

After graduating with an engineering degree and then an MBA from Ohio State, Paul started on the management development track at Ford Motor Company in Detroit. After five years, he departed to start a staffing company with a partner. They sold it to a publicly traded firm for $2.9 million five years later. Along the way, Paul was Finalist for Ernst & Young's Michigan Entrepreneur of the Year two years straight. Paul later entered the real estate sector, where he completed 85 real estate investments and exits, appeared on an HGTV Special, rehabbed and managed dozens of rental properties, developed a waterfront subdivision, and started two successful online real estate marketing firms. Three successful developments, including assisting with development of a Hyatt hotel and a multifamily housing project, led him into the multifamily investment arena. Paul co-hosts a wealth-building podcast called How to Lose Money and is a frequent contributor to BiggerPockets, producing live video and blog content on a weekly basis. Paul is the author of The Perfect Investment—Create Enduring Wealth from the Historic Shift to Multifamily Housing (2016) and is the Managing Director of two commercial real estate funds at Wellings Capital.


  1. JL Hut

    Entertaining, risk, drama, Intrigue and factual, what more could you ask for. Loved it. You should start a mini series. Netflix is looking for new material. Tell you wife you moving to Hollywood, if she is hesitant have her call me. I am behind you man. 5 stars.

  2. Curt Smith

    I agree with the point of this nice blog post. And have embarked on my own path via being a partner who bought a mobile home park. So I’m voting with my wallet too.

    In the year and few months since we bought the park, we kept marketing for more parks. In parallel I kept buying SFRs in my personal businesses.

    In the year since buying the park, I have deployed about $300k into SFRs and $0 into a 2nd park.

    I have taken 2 MF boot camps and am fairly educated in MF and now mobile home parks. I can say if quiting your day job is your goal (just increasing your income) you HAVE TO include deal flow in your decision process. I know of newbies who said they are committing to buying MFs and over a year later they’ve not bought any MFs. Where I’ve bought a bunch of SFRs.

    I wish MF was not so competitive. From 16 units on up there’s dozens of moneyed buyers making full price offers. Cap rates are insanely low. I would NOT want 99.999% of the deals that are trading hands today. They just don’t make enough money for me. My needs are 13% rate and 25% cash on cash. I have not seen any deals trade anywhere in the same universe…

    Best of luck folks. Not saying this is not possible, just that deal flow and at the end of the day profits in your pockets, it is very very difficult in the SE and Atlanta greater area.

  3. Matt Geerts

    I love your focus on fundamentals instead of hype and keywords. I am a bit worried, though, about your conclusion that these trends are fixed for generations to come. What makes you think that the very recent phenomenon of reduced home ownership is going to be a long-term trend? What happens to all this data if home ownership becomes the new trend of today’s teens who didn’t see the big bust of 2k8, but instead have watched the big cheap buying frenzy of the past 10 years. What if that home ownership rate goes back up to high 60’s? What if the source countries of immigration (often China, India, etc) grow in GDP and average personal wealth in the next ten years (they will) and immigrants start buying houses in America in increasing numbers? What if government policy starts pushing people back to home ownership (governments aren’t really that smart, afterall). All of this is combined with the recent massive boom in MF construction, plus the massive influx of investor money into MF (due to well written articles like this) causing deals to become thinner.
    I’d love to hear your thoughts on this. I honestly am not trying to draw dire conclusions, just spark some discussion. My eyes are on bigger purchases in the coming years, so this topic is very important to me.

    • Jim Costa

      Great article with great facts but I think some of the assumptions are flawed. @matt geerts I agree with some of your comments. As we have seen a boom in the housing market over the last few years SF homes have skyrocketed 20-50% and have even doubled in the last 3 years in some areas. This has created a huge opportunity in low to large multi unit properties as the rents for SF have priced out many renters. When a house sells for 150K and rents for $1100 and then 2-5 years later sells for 300K it no longer makes since to rent $1100 and must now rent north of $2k. Renters getting booted out are having to move to apartments or those that still want a private yard for kids and pets are moving into 2-4 unit properties. If you have bought a 2-4 unit complex in the last 12-24 months “correctly and under performing” you have been scrambling to get the rents to market rates. I bought 6 properties and have seen rents go from $800 to $1500/month with minimal improvements (carpet and paint.) Their is still great buying opportunities, I believe for a couple years if you can buy right. We are seeing a perfect storm on the horizon that will affect the MF market drastically.

      Large commercial investors recognized this trend and started building large complexes that are just starting to enter the market place and 1000’s more to come on line in the next 12-24 months. We also see interest rates climbing steadily hindering the buying power of investors. Projects that were in the design faze 2 years ago that are being completed now are reaping huge rewards from the increased rents. I fear to enter the design faze now and be entering the market with new units in 2 years you will be entering a plateau or the beginning of the downward trend in rents due to competition. The uncertainty of illegal immigration and deportation could have a huge impact on vacancy factors.

      The plus side. I agree that many baby boomers are returning to renting. The ones I know doing this are cashing out their expensive homes and renting luxury apartments or buying/renting 2nd home condos and apartments. This trend will continue as more baby boomers and gen X’rs retire. Many older millennial’s Gen Y (1977-1990) have benefited from double incomes and now looking at starting families and have the income to exit apartment life and buy homes. The younger millenials (1990+) and Gen Z are simply priced out of single family homes and looking for entry level homes will have to house hack or turn to town home, condos, or 2-4 unit complex. These factors will help stabilize small 2-4 multi family units.

    • Tyler Huntington

      If the recently revealed tax plan is passed. Home ownership will go by the way side. Appears as tho US Government is pushing away from owning a home. Standard deduction to $24k, no longer able to write off property tax. I live in the densely populated LA Metro area. Most development in the area is MF. So cal is a unique market but if values continue to climb, home ownership affordability will continue to diminish.

  4. Within this article is a cautionary tale, North Dakota. But oh well, some areas are perennially in demand, some aren’t. Reading the tea leaves is critical in some areas. Other areas are a slam dunk and are priced accordingly.

  5. Christian Carson

    Paul, great article.

    I have one question for you: have you considered the possibility that the demand may shift toward single-family rentals versus multifamily?

    I see this trend growing rapidly in my home market of Cleveland. Good tenants almost exclusively demand single-family rentals, fullstop. Buying a multifamily in a good neighborhood will almost guarantee that your tenant pool will be of the lowest tier. Presently, most markets simply do not offer viable SFR options for tenants. If your prediction of a sea change in renters versus homeowners holds, then it follows that this country will have a glut of SFRs versus MFRs as the current generation of homeowners die off, and the relative mix of units will change significantly. This may change tenant tastes drastically and MFR units may become the leper of the land.

    I see this trend in Cleveland now where it is easy to snag a SFR in a D-neighborhood for $800-1000 per month. It is simply worth it for a tenant to pay a few hundred extra for their own plot of land. I think this is where the rest of the country is headed, although the investment has not materialized yet. Comments?

    • Cleveland is one of the low cost markets. In the high cost markets it’s not a “few hundred extra” but a few thousand extra for a SFH as opposed to an apartment. I don’t expect a stampede.

      • Christian Carson

        This article is about observing long-term trends. Currently about 25% of homeowners are over 65. This means that over the next 25 years, about a quarter of the housing supply will be turned over into a market of uninterested buyers. There are two sides to every coin — if millennials aren’t interested in buying their parents’ homes, prices will fall and either buying will become affordable or the owners will need to rent those homes. The only two ways this isn’t going to affect the rental pool is if (a) we’re wrong and millennials start buying homes or (b) foreign investors buy them up at market prices, keep them vacant and let them fall down.

        I’m still a multifamily buyer, but it’s wise to understand the long-term trends which is what this article is about.

        • Prices of single family homes will fall? No, that is not the way it works in the tight supply markets. As the ratio of renters to owners goes up, the SFH market becomes tighter and prices go up. I think in this as in many things, California leads the way. Rather than markets like Cleveland being a harbinger I think they are behind the times.

    • Paul Moore

      Hi Christian,

      I really like your thought process and I think it is certainly possible that you are right. SFRs could be in higher demand over time. I know that is what my family preferred when we moved (we had 6 people, though).

      On the other hand, you have a trend toward tiny houses and shared living spaces for Millennials. And with the fact that Millennials have record debt loads and a propensity to rent, I don’t think the demand for smaller rentals (i.e. apartments) will die down any time soon.

      As an investor, I certainly prefer the economies of scale offered by a large # of units under one roof. It is far easier to manage 100 units than 100 homes. And if you want to get to (say) 1,000 units, so much more so.

      Thanks again for your thoughtful comments, Christian.

  6. Ralph R.

    Very good article Paul. I’ve had the entrepreneur big for decades. It’s cost me a lot and gained me a lot. Any how I just wanted to clear up about the semi bonless ham. I’m a 40 year meat cutter including having my own usda inspected meat shop. A ham is usually the whole hind leg of a pig. The term “whole ham” means it’s the whole hind leg minus the shank as its cut off the pig. This includes 2 bones the femor or leg bone and the Ech (pronounced H bone). Another name for the Ech bone would be hip bone. If I take a whole ham and remove the Ech bone I now have a semi bonless ham. I guess It’s easier to say than “a ham with the hip bone removed”. LOL. now one of life’s great mystery’s is cleard up for you!! RR

  7. Christie Gahan

    With all the statistics and charts, I’m suprised that no one mentioned the following.
    1) College grads have huge debts. Not all but many. Young couples have the debt of a starter home with out the starter home. They simply will not qualify for a traditional loan.
    2) Employment. Keep in mind that the Obama admin changed the definition of “employment”. If you work 5 hours or more, the govt numbers count you as employed. ( I believe it was 35 – 40 hours prior). Nobody is making a mortgage on 5 hours a week.

    • The other elephant in the living room is interest rates. If and when they go up to historical norms of 6-8%, housing will be even further out of reach than it already is.

    • Paul Moore

      Christie, those are great points. Student loan debt in America is hovering around $1.4 trillion. This is $620 billion more than total U.S. credit card debt. People will definitely continue to buy single-family homes, but student loan debt isn’t going anywhere and that will certainly contribute to more renters. The employment definition is interesting, I hadn’t considered that before. Thanks for commenting!

  8. NA P.

    Like everything else in real estate the most important factor here is location. A large multifamily in a desirable metro area where land is scarce and people want to live for convenience may make sense, otherwise not much advantages over SFs as other developers can always build more MFs where there’s land. Retirees may not care for the hustling hustling of town centers and may opt for quiet and land for gardens. Gen Ys may be renting in suburbs with good school districts. Another factor not considered is that In less than 10 years autonomous driving cars may make commuting a lot more tolerable, even comfortable, that living a bit farther may be much less of a big deal than today.

  9. Erik Simpson

    Great article! It covered all the different thoughts that come up when considering getting into multi-family real estate investing. How would you recommend a young, recent grad school graduate get started in real estate investing?

    • Paul Moore

      Erik, thanks so much. What you should do would depend on your goals. But some general advice would be to learn as much as you can while you work your job. Save as much as you can. Find someone older than you who does what you want to do and serve him/her. Don’t expect overnight results. Give it 10 years.

  10. JL Hut

    Ralpf, the “whole ham” question came to my mind about a decade ago and I have not had a good nights sleep since. Thank you for clearing this perplexing question up. My wife thanks you also, for tonight we look forward to a full and good nights sleep. Because of you, tomorrow looks like a bright new day.
    Thanks again. JL

  11. Lauri Hines

    I enjoyed your article and agree with your analysis of the demographics, but it is next to impossible to find a multi family investment on either coast where the numbers work.

    Even in the Midwest, cap rates are hovering at the 5 to 7% range, out of reach for most individual investors.

    • Paul Moore

      Lauri, thanks for your comment. You have to find the right market for you. We don’t do anything in New York, LA, Seattle, Boston, Chicago, Miami, DC because of low cap rates. We like some specific markets in the Southeast. There are definitely good deals, but it’s not easy to find them.

  12. Rita Colón-Burnett

    Excellent read.
    In metro NY, new multi family, amenity rich, complexes are having a challenging time with vacancies. Cap rates in older units are in the 3.5%-5%. In these, rent stabilization and years of poor management are mitigating factors. Government regulations on 6 plus MF housing makes me a fan of SFR and 2-5 unit MF.

    • Paul Moore

      Rita, metro NY is a very difficult market for large-scale multifamily. As you mentioned, cap rates are very compressed for class B multifamily. We don’t do anything in the NYC area for that reason among other reasons. I know others have found good success with SFR and smaller multifamily in the NYC area. Best of luck to you!

    • Paul Moore

      Hey Jason,

      You are correct… my perspective is colored by my profession as a syndicator. But I will say that my choice to be a syndicator was based in part on these types of demographics.

      As far as cash out refi’s to pay off student debt… I could be wrong, but I think most people with high student debt would not own a home in the first place. Just a generalization… of course there are many exceptions. Thanks for the comments!

    • Paul Moore

      Jarret, I think the best thing a newbie can do is self-education. This could look like reading books, listening to podcasts, networking with other real estate investors, and possibly shadowing more experienced real estate investors. Another thing to do is just save as much money as possible, so when the time is right you have money to invest. A long-term outlook is helpful as well.

  13. Viola Enfield

    Well written article. Love the stats, and I also am looking forward to a good night’s sleep now that the ham mystery is solved! Another factor in large cities is that the Boomers who are retiring may currently be renting in anticipation of moving to the country after retirement. There could be a drop in rentals as this happens.

    • doug moe

      Like John Murray who posted down below, I also live in Portland, Oregon. Some SFR’s are renting @ 4-5k per month near inner city. That prices many potential renters out of the equation compared to multifamily renting around 2k per month near the same area. That’s a massive change finding a tenant that qualifies at 12-15k per month income for a decent SFR compared to someone making 6k per month for a multi-family. A big number of homes in inner city sell starting at 500k and many well above 800k mark (property taxes alone in those areas are over 1k per month) which drastically changes the price someone can rent one of those homes for if they want to make a decent NOI.

      I’m using a number of assumptions and some pretty broad generalities, but the comparison in certain markets just doesn’t justify people renting SFR instead of Multi due to the massive cost increase.

      Key take-away – there are massive differences in different markets. I really enjoyed the analytical post from Paul which included the demographic info to back up the points that were made in the article.

    • Paul Moore

      Diego, That is a great point. I have thought about this myself, and I can’t honestly say that my analysis would no apply to SFRs. I guess it should.

      While that is true, there are massive economies of scale that apply to multifamily that don’t for SFRs. The difference b/w asset-managing a 100-unit multifamily vs. 100 single family homes is big. In a completely different league, IMHO.

      Yet, as you say, the demographic analysis is likely similar or the same.

  14. John Murray

    I live and invest in Portland Oregon, the most affordable major city on the west coast. I have 8 SFR homes (BRRR) and clear about $60K per year in rent profit with another $200K in appreciation. I have other passive incomes and all my income is passive. The demographic that rents are about 66% and the home owner is about 33%. Which is upside down if the home owner graph is correct. Most people have revenue stream but few have capital. This seems to ring true with America in general. There is about 35K job openings just on Linkedin and the employers seem to favor the young educated set. They spend money like drunk sailors, seems the rental game is quite lucrative here. The mono industry economies would be more risky, after all the timber industry in Oregon is just about nonexistent. So banking on issues like the price of oil would not be a choice I would make.

    • Paul Moore

      John, thanks for your comment. Are you saying $60k in rent revenue? Or profit after expenses? I’m not entirely sure what you are saying about homeowners vs. renters. The homeownership rate in individual cities/markets will certainly differ from the national statistics. All the best!

  15. Lennon Lee


    Excellent article and beautiful summary of your book. I actually finished reading the book a couple weeks ago and have been recommending everyone in my network to read it.
    Being a multifamily investor/syndicator myself I believe you could not have explained the benefits of multifamily investing any better.
    I recently started a meetup group down here in South Florida called Miami’s Multifamily Investing Club and we are hosting monthly events specifically focused on commercial multifamily investing.
    If you are ever in Miami it would be a pleasure to have you as a guest speaker at one of our meetups.
    I look forward to connecting.

  16. Paul Moore

    Thanks so much, Lennon. I appreciate your comments, and I would be honored to be a speaker when I am in the area. I will try to time a visit for some other events I may have in your area this Fall or Winter.

    It was great talking with you yesterday.

  17. Jason Schwartz


    Nice article backed up by data. Early in your piece, you mention “I could tell you about the leveraged returns. The stability and safety of this asset class. The stunning tax advantages. And much more.” …and that you may go into more detail about these topics at a later date.

    Did you ever go into greater detail regarding these topics? I’d appreciate learning more about “leveraged returns” and the “tax advantages” of multi family deals in particular.

    Thank you!

    • Paul Moore

      Jason, my apologies for the very late reply. I’m just not seeing this. I would recommend checking out my other articles on multifamily here on BiggerPockets. There are also tons of great authors on BiggerPockets who talk about these topics. I would recommend you check out my book The Perfect Investment on Amazon if you haven’t already. If you search on Amazon for multifamily investing you will find other great books as well.

  18. Jessica Eisenhauer

    Our family owns land in ND on the Bakken. Life out there has changed dramatically for the small-town people who once occupied this quiet land. A need for clean, efficient housing is definitely there. So many young people flocked here for work, and many of them without a plan. I don’t think they realized there are actually only three businesses in Arnegard, ND. The bar used to actually double as the post office at one point. They need to populate these areas carefully considering the past 50 years it was the only state in the US with a constant decline in population.

  19. Why is there so little inventory for houses then, if everyone wants to go and rent?

    I think this article and it’s conclusions are a bit dated already.

    That being said, I still think another shoe is left to drop though and that’s interest rates going back to normal levels and the new tax plan which favors renting over owning in the high cost states. Both are going to put the hurt on homeownership for years to come.

  20. Justin Koehn


    I read this post when you first wrote it, and again when it was sent to my email by BP weekly blogs email. I don’t disagree with you that multi-family buildings are a PHENOMENAL asset class, but I do question some of the assumptions you list here. And it is not just you; I have read these same assumptions multiple times across BP. Here are the points I question (again, question doesn’t equal disagree with)

    1. Boomers are increasingly renting, and therefore demand is going up (and will continue to). Boomers are a wave, as seen in your graphics, that will pass (not to be crass or insensitive because my parents are in this group, who I dearly love). When they pass on, I would imagine a serious drop in the number of retirees, and therefore how many of them will be renting. Long term, like 20+ years, this seems like it will have an impact.

    2. Millennials are renting more, and therefore demand is going up (and will continue to). Again I wonder if this is a wave crest or “bubble trend” that will pass as these folks realize (as every generation before them has) that it is preferable to raise you kids with a back yard, garden, a dog, and a place to park you travel trailer than on the 37th floor. Will the next generation acquire as much toxic student debt as the last one has or will we as parents advise them a bit more wisely so they are more financially prepared for life after school?

    3. Immigration is driving up demand for cheap housing (and will continue to). Our current president probably won’t pave a road to easy citizenship, but whose to say the next one won’t? Once an immigrant has citizenship and the ability to get financing, why wouldn’t they buy a house? Home and land ownership seems to be a large enough part of the “American Dream” that drives immigration that it shouldn’t be ignored.

    Again, I agree 100% that MF is amazing. But, I would argue for much simpler reasons. The same reasons that make mobile-home parks look so attractive on the whole – it is an affordable housing option, and therefore it won’t sit empty, if managed correctly. I’m obviously not a Cardone-ian (though I do love the guy), but that’s just me. Thanks for the VERY well written and thought out article! We appreciate it.

    • Paul Moore

      Justin, thanks for sharing your detailed points. It is impossible to predict with certainty where America will be in 50 years. However I think it is safe to say that the multifamily outlook seems pretty stable for the next 20+ years. In maybe 10 years, we can see how millennials are doing paying down their $1.3 trillion in student loans. We can see how Generation Z is doing with buying homes. We can also see how immigration is going and the trends there.

  21. Hank Demarest on

    Hey Paul – great article, and convincing argument for a syndicated multi-family home. Question – in general, what is the minimum investment for a syndicated project, and how does one get started with one?

  22. Allan Rosso

    Hey Paul,

    Recently, my interests started shifting towards learning how to invest in smaller apartment complexes. Your articles always solidify the fact that I shouldn’t be scared to move on to bigger and better things. I appreciate the inspiration!


  23. Charlie DiLisio

    Eye opening and well thought out conclusions. Love the idea and here in South Florida the prices seem to be outrageous and we are competing with hedge funds and investors coming in from other states. Many who don’t mind over paying and understandably so. I will focus on multi-family and probablly have to start slow and build from there. People need affordable housing and I tend to re-hab them to attract a higher price and more stable renters. Thanks for the insight.

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