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It’s The Best Time In 30 Years To Be Investing In Apartments!
From Barron’s Edited by Robin Goldwyn Blumenthal:
The carnage in housing hasn’t spared any sector of the real-estate market. But favorable fundamentals could turn apartments into lucrative investments again. “The demographics are very supportive for apartments, with a lot of young people graduating from college,”says Sam Chandan, chief economist of real-estate research firm Reis. An estimated 82 million echo-boomers (baby boomers’ progeny) will be striking out on their own over the next seven years. While some surely will move back to the parents’ pad, many will join the ranks of the renters. So will an in-flux of immigrants and displaced home owners.
During the single-family housing boom, multifamily-market supply was very restrained: Site completions as a percentage of existing stock averaged 1% in the past five years, half the previous five year average. “It’s the best time in 30 years to be investing in apartments,” says Christopher Finlay, managing principal of Mission Residential, which does private syndications of apartments in growing middle markets like Salt Lake City-where’07 rent growth out paced the 4.4% average increase nationwide.
Shares of apartment real-estate-investment trusts fell 25% last year, more than the total REIT universe of 16% according to the FTSE Nareit index. But apartment REITs are only one of two sectors to be up year-to-date. Middle-
market apartment REITs possibly poised for turn around: Mid-America Apartment (ticker: MAA) and United Dominion (UDR), which don’t have big exposures to boom-and-bust markets.
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about 3 years ago
Within every challenge is a choice and within every hardship is a opportunity.
This is an interesting idea going after apt properties. Is there a foreclosure component where apt building owners are suffering the same fate to their properties as the over leveraged home owners who will be displaced back into apartment as their dwellings?
dean
about 3 years ago
“It’s The Best Time In 30 Years To Be Investing In Apartments!” agrees author with Christopher Finlay. I bet the thesis was initially applied in the US, but I can only certify it. I work as a Toronto realtor and apartements are ’selling themselves again’. We’ve witnessed some plummeting in sell numbers last year, but this winter/spring the demand moved up a little. The prices are going up again, the rent as well. Well I’m not sure about the “30-years best era” however I can advise investing in apartements(after consulting professionals!).
about 3 years ago
Apartment rentals and house rentals will do well. With so many foreclosing and moving onto renting for some years to come due to bad credit this will be there only option.
about 3 years ago
It is a great time for apartment market fundamentals in a number of select areas of the country.
Certain Texas markets and others have that combination of high growth (both population and jobs) and an apartment supply that is level or actually at lower levels than in years past … due to condo conversion in some areas.
The challenge right now is getting financing in the current credit crunch. On Monday GE Capital and Citigroup completely quit lending on commercial – hope this loosens up soon … I am partnered right now on 942 units in San Antonio and its a very tight market for financing … the deal is a beauty though.
http://www.investortours.com
about 3 years ago
I work in the residential real estate arena. I do agree that with the displaced homeowners that the rental market will be stronger in the foreseeable future. However, as we all know real estate is local, so readers need to keep in mind the demographic (population) changes that are taking place within an area they are considering an apartment purchase. IMHO, you will need an increasing population, as Steve pointed out.
Naples’s last blog post..Naples Real Estate News 03/20/08
about 3 years ago
Naples,
Your posit that “you will need an increasing population” in order to consider purchasing apartment property.
In my opinion it is simple supply and demand numbers. Although demographics could be considered important what is more important questions:
1. Popularity of the area
2. Is Rent Control in place
3. Is there a limit on the number of rental units being built in the city which would drive supply and demand
If you plug in San Jose or San Francisco, CA you have a much different rental market than Naples, FLA. In the aforementioned areas, especially SF, rental occupancy rates run as high as 98-99%.
Here is an easy rule of thumb. Buy where the jobs are, in the most popular area you can find, with the most economic growth possible.
dean
dean’s last blog post..?Hiding in Plain Sight? Spitzer and Okun: Did They Want To Get Caught?
about 3 years ago
Dean – I agree with your comments. The point that I was making was that real estate is LOCAL.
Naples’s last blog post..Naples Real Estate News 03/20/08
about 3 years ago
Nice post! Property investment could be a goal in business if you have the appropriate tools and your investment value projections are measured correctly.
Property investment
about 3 years ago
Great post. One question….I thought that larger apartment buildings were always tied completely to rent amounts. Wouldn’t the rents have to go up to make investing in apartment buildings a winning solution? I haven’t heard that we are going to see large increases in rent, but simply a strengthening in the rental market back to pre-2005 days.
Thoughts?
Minnesota Investment Property’s last blog post..Stupid Property Repairs #2
about 3 years ago
Thanks for the comments!
MN Investment Property,
Rent increases are only one fraction of evaluating a solid investment in apartments. Proper management, keeping tabs on operating expenses, tenant training (helps to minimize turnover costs) are just a few examples.
Remember that all markets are cyclical and time is ALWAYS on your side with Real Estate. If your looking for short term large returns, try Las Vegas!
Keep on Schmoozing!
about 3 years ago
Thanks. If I bought in Vegas, I would never make it to visit my properties as I would be at the craps table all the time!
Minnesota Investment Property’s last blog post..Stupid Property Repairs #2
about 3 years ago
I think it´s a good way to earn money a medium-term.
Investing in a business is a good idea and you´ll have your future secured.
laura.
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