Here are five of the top highlights:

1. Renting’s Continued Popularity
Today’s millennials are still likely to rent rather than own, especially the younger ones. Plus, Gen Z is just starting to enter the market as a new renter pool. Baby boomers, too, will continue to drive demand for apartments, due to lifestyle changes and “downsizing,” opting for rentals in retirement.
Homeownership rates are still down from pre-recession levels, and CBRE and Hamilton Zanze expect any upward movement to be modest. In 2017, homeownership rates were 32% among 25- to 29-year-olds and 46% among 30- to 34-year-olds, well below the national average of 64%, indicating that many young residents will remain renters. This decline in homeownership is due to increasing levels of debt (student loan balances held by those ages 30 and younger have ballooned by more than one-third over the past 10 years, according to the Federal Reserve Bank of New York), hindering young people from saving up for down payments or qualifying for mortgages.

2. Significant Pent-Up Demand
Since the Great Recession, the number of financially burdened young adults living at home has increased. As the economy moves toward full employment and wages increase, it’s anticipated this pent-up demand could translate into over 3 million to 4 million additional renters. Meanwhile, the annual new-apartment supply averages only around 325,000 units.

3. Favorable Performance in Economic Downturns
Apartments tend to remain stable during recessions compared with other property types, and the sector is less sensitive to changes in economic activity. Apartments have a much shorter leasing cycle, one year, compared with four to seven years for other major property types, making them flexible and able to adjust more quickly to changes in the market cycle.
Apartments tend to have lower capital-expenditure requirements and lack the tenant improvement and leasing commission requirements of other property types. Therefore, a higher proportion of net operating income is distributable as cash flow, and the yields are generally higher and more stable than for other property types over the long run, according to CBRE’s data.
Apartments also tend to recover more quickly than other property types as the economy emerges from recession. According to the Real Capital Analytics (RCA) Commercial Property Price Index (CPPI), core commercial property fell 36.6% during the global financial crisis and it took 78 months for full recovery, while apartment values fell only 32.2% and took just 47 months to recover the loss.

4. Favorable Performance in Both Stable and Rising Interest-Rate Environments
If interest rates remain low, apartment investors are likely to continue to benefit from low financing costs. Apartments have benefited from financing rates that have averaged more than 48 basis points lower than those of commercial property over the past 10 years, according to RCA. Apartment investors may also benefit from higher interest rates, as apartments will serve as an effective inflation hedge. Over the long term, apartment rents have tended to outpace overall inflation rates.

5. Location, Location, Location
In this cycle, a large share of new apartments has been constructed in urban markets with a high concentration of Class A development. While this asset type is in demand, developers have also overlooked prime suburban areas.
Many “renters by necessity” will continue to fuel demand for suburban product and are looking for apartments in select, well-located, suburban areas with quality transit, amenities, and school systems.
Suburban rent and occupancy performance have outperformed that of downtown areas, says the CBRE/Hamilton Zanze report. Investors continue to acquire apartments at more favorable initial acquisition yields, or cap rates, in the suburbs. According to the CBRE Cap Rate Survey, the national average suburban, Class B cap rate is 5.41%, while the comparable cap rate for infill locations is 5.14%.

Multifamily Executive 5 Reasons to Invest in Multifamily Hamilton Zanze and CBRE on the many benefits the apartment market has to offer buyers. By Lauren Shanesy

Read the article on MFE’s website HERE

The post 5 Reasons to Invest in Multi-family appeared first on Demo Investor Host Website.

SAN FRANCISCO—COVID-19 has wreaked havoc on many commercial real estate segments. While the multifamily sector is a resilient one, it is not immune to the wrath of this global pandemic.

But despite the many challenges, there are some positive signs that support the ongoing resilience of the multifamily sector during this health crisis, says Zain Jaffer, founder, and CEO of Zain Ventures. There are opportunities facing economic subsectors and the market as a whole along with key factors that will determine the severity of the pandemic’s impact on the sector.

“Everyone is currently worrying about the impact COVID-19 will have on our everyday life. As the pandemic takes a human toll, the economic fallout is immense,” Jaffer tells GlobeSt.com. “The multifamily real estate sector is resilient and while long-term effects of this crisis are yet to be known, there are several fundamentals that should provide hope for the future of multi-family real estate.”

Demographic trends favor continued multifamily demand. In addition, many businesses are now operating remotely so flexible shelter or renting versus owning remains desirable. And, graduating students with high debt will most likely choose to rent because securing a mortgage remains challenging.

These and other factors sustain the demand for affordable housing, which has been constant since the Global Financial Crisis, according to the US Multifamily Market Update published by UBS. Overall, the UBS report acknowledges the short-term concerns for investors in multifamily housing but maintains a promising long-term outlook with sustained demand for suitable housing rentals.

Long-Term Benefits For Multifamily Real Estate Investors
Despite the future unknowns of the COVID-19 pandemic, there are many positives for the multifamily industry:
In a volatile market, multifamily real estate will remain a solid investment for pension funds and REITs.
Emergency-level interest rates will also be a boon to long-term investors.
Tenant turnover is expected to decrease dramatically, reducing the operating and capital costs of securing new tenants.
As telecommuting remains in a post-coronavirus world, the demand for apartments particularly by young professionals could increase.
Vacancy rates should remain low with the decline in the construction of new units.
​
Contributing Factors
The effect on rentals in different classes and geographical locations will vary. Class-A apartments, which tend to house workers in growth-oriented industries, will fare better than class-B and-C apartments that house tenants in a mixture of economic sectors. This is especially true for class-C apartments, with many renters in the entertainment and food sectors. Tourist-reliant regions that depend on leisure and travel will be more deeply impacted such as California, central and south Florida, Hawaii, Las Vegas, New Orleans and New York.

As of late, lenders have been handling an increased volume of calls from clients concerned with debt obligations as the COVID-19 crisis continues. To help with the crisis, Freddie Mac’s multifamily COVID-19 program provides three months of forbearance for multifamily borrowers and tenants.

The government may also push for further legislation or executive action that will allow local jurisdictions to implement prohibitions on both evictions and foreclosures. Although taking advantage of these programs could negatively impact near-term operating results, UBS views this as a net positive for the multifamily sector in the longer term.

The Coronavirus Aid, Relief and Economic Security Act provides for an expansion of unemployment benefits to include people who are not normally recipients, and a loan and grant program for small businesses to help maintain payrolls throughout this emergency period. This, plus the subsequent Paycheck Protection Program and Health Care Enhancement Act, aim to help tenants who cannot cover April, May or June rents.

COVID-19 is likely to accelerate the use of technology in the real estate sector. To limit person-to-person interactions, self-touring technology, smart lockboxes, immersive virtual apartment tours, drone footage, online leasing, and automatic rental collection may be used more often, along with technologies that provide cost savings, such as keyless entry, moisture and water sensors, remote lighting/thermostats, and automated self-leasing. All of these technologies will improve the traditional apartment rental experience, providing much needed cost-saving measures in a post-coronavirus world.

Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieve its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.

View this article at Globest.com

The post While Resilient, Multi-family is Not Immune to COVID-19 appeared first on Demo Investor Host Website.

1. Stocks;
2. bonds, CDs, and savings accounts; 
3. commodities;
4. collectibles;
5. real estate.

Let’s explore each of these investment options. First, individual stocks and mutual funds. Stocks and mutual funds can be a good choice, and in fact, we allocate some capital to this asset class in our personal portfolios. 

But the stock market is volatile and can turn on a dime. 

If investor sentiment is at a low point when you need to sell, things can turn out quite badly.

Moreover, flash crashes, Bernie Madoff type frauds, insider trading schemes, high-frequency hedge fund trading abuses,  dot com busts, and other market manipulations and excesses have caused many Americans to leave the stock market. 

Investment in stocks or mutual funds is down from 67% of all Americans in June 2002  to only 52% in April 2013 

These disturbing developments led Charles Schwab,  the legendary discount brokerage and mutual fund CEO,  to write about these abuses and manipulations in a recent Wall Street Journal guest editorial.

If Mr. Schwab is concerned, then perhaps individual investors have good reason to be concerned as well.

Over very long periods of time, stocks can return about 9% per annum including dividends.

So, while stocks can make for a reasonable investment into the long-term economic prosperity of America, one may want to look at alternatives for at least part of one’s investment portfolio.

The second option is bonds, CDs, and savings accounts.

These investment options are thought to be safe because they generally provide for a return of capital if held to maturity. But these investments yield relatively low returns, and they can be devastated by inflation. In an inflationary environment where interest rates are rising, bonds and CDs sold prior to maturity must be sold at a loss to the principal investment. So, inflation creates a double whammy on bonds and CDs—lower real rates of return and loss of principal when sold prior to maturity.

The third option is commodities, like gold and other precious metals, oil, and agricultural products. Investing in commodities can be complex. The investment can offer diversification and inflation protection, but commodities generate no income or economic output whatsoever. The investor simply owns the commodity, hoping to profit from an increase in price at a later date.  Some would call these investments mere price speculations.

The fourth option is collectibles, like rare coins, stamps, and art. Collectibles are a lot like commodities; they too do not generate income or productive outputs and are just speculations on future prices. Besides, they are difficult to buy and sell and often come with high commission schemes.

The last investment option is real estate. As an investment, commercial real estate, when structured properly, can be an IDEAL investment—that’s  I-I-D-E-A-L.

Let me explain.

The first I is for Income. Commercial Real Estate generates rents. Rents can provide positive cash flow and relatively predictable returns. The second I is for Inflation Hedge. Research demonstrates that commercial real estate values are positively correlated with inflation so that as inflation rises, so do the values of commercial real estate. 

This makes sense because rents can be raised to keep pace with inflation. This is even more true in markets that are not overbuilt and where there is strong rental demand and job grow–the fundamental characteristics of emerging real estate markets in which we invest at Right Place.

The “D” in IIDEAL is for depreciation.  A real estate investor can benefit from tax deferral through the income tax depreciation deduction. This is a tax benefit not available from the other investment options I have mentioned.

E is for equity build-up. When a property generates a positive cash flow, the tenants, over time, pay off the mortgage. When the property is sold, the equity build-up is converted into cash.

The A in  IIDEAL is for appreciation. Over time real estate values increase if the property is bought right, and this is especially so in emerging markets that are poised for rapid growth. Moreover, this appreciation enjoys favored tax treatment as a long term capital gain if the property is owned for the requisite holding period.

Finally, L is for leverage. While too much leverage can create unnecessary risk, it is typical to finance the majority of the purchase price on commercial properties.  So, the owner puts down only a fraction of the purchase price, but that person gets to keep 100% of the profits. While the lender is taking the bulk of the risk, the borrower gets to keep all of the profit. This is a key differentiator between real estate and the other investment vehicles I have discussed.

Commercial real estate has two other positive attributes. Research has shown that 

(1) returns from commercial real estate are uncorrelated to those of stocks and bonds and (2) perform better than stocks and bonds on a risk-adjusted basis. This makes commercial real estate ideal for consideration in a diversified portfolio.

For these reasons, a prudent investor may wish to consider commercial real estate in connection with retirement and investment planning. 

If we can be of any assistance to you YOUR COMPANY NAME  as you consider whether commercial real estate has a place in your portfolio, please let us know. 

We provide our investors with the opportunity to participate in emerging real estate markets without the hassle of managing properties or the headaches of dealing with tenants.

The post Why should you consider commercial real estate as an asset class worthy of investment in your retirement or investment portfolio? appeared first on Demo Investor Host Website.