Real estate has long been a cornerstone in diverse investment portfolios creating long-term wealth strategies for the world’s wealthiest investors. What draws investors to real estate and apartments? Read on to find out why apartment investing is a strategic part of this picture.
According to the realdeal.com, the current richest American property mogul is Donald Bren, a Southern California investor behind Irvine Company. Per Forbes list of billionaires, Mr. Bren’s empire owns over 60,000 apartments. He joins many on Forbes list of billionaires who utilize apartments in their wealth building strategies.
What do investors seek in multifamily investment strategies?
Income-producing real estate investments such as apartments can provide excellent appreciation. Over time, apartment properties increase in value when income is improved through effective property management that in turn drives higher value and rent increases. Multifamily investments also offer tax benefits and hedges against inflation. We can’t say this for a bank CD currently paying a paltry 2.8%, can we?
There are always opportunities in the multi-family marketplace. Distinguishing opportunity from potential disaster is a learned skill.
Recognizing Opportunity
Apartment rents are driven by location, jobs, economic growth and population shifts. Opportunity is often hidden within shifting demographics. Recognizing longer trends in multifamily investing gives an investor advantage over those who may only follow current market analysis.
With greater experience in apartment markets, multifamily process improvement and performance comes more detailed and insightful underwriting and due diligence. This can illuminate hidden potential for expense management and revenue enhancement. Uncovering ROI unseen by others provides competitive advantage. Understanding what to emphasize and what to minimize with an eye on exit strategy keeps emotions in check, expenses in line with budgets and returns flowing.
In the U.S., we are experiencing an unprecedented time in history with two bulging segments of the population, each with staggering numbers, choosing to rent rather than own a home.
- Boomers: 75.4 million baby boomers are heading into retirement. Boomers are ages 53-71 born between 1946 and 1964. Bucking previous trends of home ownership, more and more boomers are celebrating their empty nest with freedom from lawn care and property taxes. Instead, they are choosing the safety and simplicity of the “lock it and leave” care-free apartment lifestyle to pursue travel, hobbies and second careers.
- Millennials: In 2014, the number of millennials in the U.S. actually eclipsed boomers. According to the U.S. Census Bureau2, there were 83.1 million millennials compared to 75.4 million boomers. Millennials are ages 20-36, born between 1981 and 1997. More and more millennials are choosing to rent apartments long term instead of buying single family homes.
Together, these two groups total 158.5 million. And, they want the freedom and lifestyle afforded by today’s apartments.
According to the National Real Estate Investor, U.S. apartment rentals will continue to be a good investment choice. Occupied U.S. rental apartment units rose by 20 percent above the prior 10-year period. The apartment sector offers steady income streams with rents that adjust with inflation annually, with new opportunities in professionally-managed rental housing. Interest is rising in high-quality rentals across all price points and regions, demanding a well-diversified inventory.
Is this a good time to invest in apartments? We think so.
When Is It Time Not to Invest in Apartments?
If the deal appears too good to be true… then there’s more digging to be done. Laser-focused, stealth multifamily due diligence is an art. When done right, a great deal of money can be made on the buy in multifamily acquisitions. When done wrong, investors can pay dearly in reduced ROI for years to come.
Structural, utility, code, regulatory, tax and insurance issues can add up quickly if one does not have the knowledge or experience to identify challenges up front. Knowing when to hold em’, when to fold ‘em and when to walk away from a deal is a learned skill earned through years of experience. Rolling up sleeves, walking properties, digging deep and and doing the homework pays off in the long run. When assessing a potential deal, there are no shortcuts.
Better World Properties LLC is known for recognizing opportunities others miss entirely or leave on the table out of fear or incomplete understanding of hidden potential. At the hub of local, regional and national trends, legislation and innovation, the Better World Family of Companies enjoys an ideal perspective from which to clearly see potential winners, avoid losers and consistently achieve above average investor returns.
Is it time to add apartments to your portfolio? Opportunities in Texas apartment investing and beyond await those investors who think ahead of the curve.
Perhaps you want to improve the performance of your existing multifamily portfolio? Give us a call. Better yet, come visit. We’ll pour some tall, cold sweet tea and take you on a tour. We love to talk apartments.