NEW YORK (MainStreet)—From his small rented apartment in the New York City's East Village, former advertising executive Joe Fairless, 30, is in the final stages of closing on a $6.8 million apartment building in Ohio.
"I made my first real estate purchase in Dallas in 2009 at the time when the market was perfect for the single-family home and there were a ton of foreclosures," said Fairless, principal of Fairless Investing, who switched from buying single-family homes to investing in apartment complexes last year.
Real estate investors like Fairless are kicking single-family homes to the curb in today's housing market to purchase apartment complexes in areas with low vacancy rates.
"There's a little uptick in transferring from single-family homes to multifamily complexes," said Leanne Eicoff, vice president of loans at CLD Capital, an Atlanta-based national lender for commercial loans and apartment mortgages.
Apartment vacancies have fallen to 4.3% in the first quarter, the lowest level since the first quarter of 2001, according to an April report released by real estate research firm Reis, Inc.The demand for rental properties is on the rise with the housing bust, economic recovery, high mortgage requirements and a constrained supply of newly constructed apartments, Fairless said.
"You have record high occupancy for rentals and new construction is starting to take place, so therefore we have more people looking for apartments," he said.
Multifamily investing is growing and in its fourth year of expansion because of the current economy and demographics, according Marcus and Millichap Real Estate Investment Services.
Hedge funds are buying up foreclosed single-family residential homes and squeezing out single-family investors and first-time home buyers, Eicoff said.
"We're seeing an uptick in these types of people - usually it's for [buying] a five- to ten-unit complex," Eicoff said about investors who are switching from single-family home investments to multifamily ones for higher returns and increased cash flow. "It's just a start to get their feet wet."