With the recent volatility in multifamily real estate market, many investors are looking to diversify their portfolios beyond just multifamily properties. While multifamily has traditionally been a stable asset class, overexposure to any single sector carries risks. By exploring opportunities in other real estate niches, investors can build a more balanced and resilient portfolio. This allows you to capitalize on varying market cycles, limit downside risks, and improve overall returns. In this article, we will discuss strategies to invest beyond multifamily by evaluating other promising real estate sectors like industrial, self storage, student housing, senior living, and more. With proper due diligence and diversification, you can go beyond multifamily to increase net worth.
Industrial real estate provides stable cash flow potential
The industrial sector has been one of the best performing commercial real estate classes over the past decade. With the rapid growth of e-commerce and supply chain networks, demand for warehouses and distribution centers is stronger than ever. Industrial assets benefit from long-term leases to investment grade tenants, often 10+ years. This enables reliable cash flow for landlords. While rents and property values have grown tremendously in recent years, fundamentals remain strong going forward. Markets with high barriers to new construction and proximity to major metro areas offer particularly favorable prospects for industrial real estate investment.
Self storage appeals to smaller investors and has recession resilience
Self storage facilities have low capital requirements compared to other commercial properties, appealing to smaller investors looking to break into commercial real estate. Investing in self storage can be done through direct ownership of facilities, joint ventures, or REITs. Geographically diverse portfolios are ideal to mitigate risk. Demand for self storage space has historically seen minimal impacts in recessions as people downsize homes or require storage during moves. However, oversupply in some markets is a concern. Still self storage offers reliable income potential for investors who conduct careful due diligence.
Student housing provides opportunities amid rising college enrollment
Purpose-built student housing has been growing as an institutional investment class, providing opportunities beyond traditional multifamily. With enrollment numbers rising at most universities, student housing fundamentals remain strong. Developments with proximity to campus in strong education markets make solid investments. Student housing also benefits from parental signers on leases and predictable leasing cycles, although turning over units each year entails more work. For investors interested in stable yields and moderate appreciation potential just steps from campus, student housing warrants a closer look.
Senior living communities cater to an aging population
With over 10,000 baby boomers turning 65 every day, demand for senior living facilities continues to grow. Developments focused on independent living, assisted living, and memory care provide specialized housing and healthcare services to this demographic. While senior housing was hit hard in the pandemic, occupancy rates have largely rebounded. Investors can target private pay assets in affluent metro areas to reduce reliance on Medicaid reimbursements. Partnerships with experienced operators help navigate regulations as well. For investors comfortable with the specialized operational aspects, senior living offers need-based demand.
Other niche sectors also have potential for portfolio diversification
Beyond the major commercial real estate food groups, there are a range of more specialized property types to research as well. Manufactured housing communities have delivered consistent returns historically, appealing to investors who can address the property management aspects. Data centers and cell towers have also emerged as institutional asset classes with durable demand drivers. And niche plays on healthcare, hospitality, and parking facilities might warrant exploration too. The key is conducting rigorous analysis to identify the most promising opportunities to complement your core multifamily holdings.
By going beyond multifamily real estate and exploring sectors like industrial, self storage, student housing, senior living, and other specialized niches, investors can build a balanced portfolio resilient to market shifts. With in-depth due diligence and local market research, a diversified real estate allocation across multiple sectors can provide solid cash flow, appreciation, and risk-adjusted returns.