Archive for the ‘Apartments’ Category

The traditional factors that may point out a good apartment investment can sometimes lead even the most diligent investors down the wrong path. Such fundamentals as single-digit vacancy rates and double-digit rental rate growth may lead to good investments today, but can end up lacking when it comes to future growth. In addition, if you simply invest in only the historically well-performing coastal markets, you end up in competition with every other investor while paying cap rates below 4% on assets with little to no upside.

The National Real Estate Investor has identified the five characteristics that define the nation’s top mufti-family markets, like Dallas, Seattle, Raleigh, Denver, and Washington DC:

1. Strong population growth
2. Young, mobile residents
3. Expanding employment base
4. Tight submarkets
5. Educational attainment/educated workers

To read the full article from the National Real Estate Investor detailing each characteristic, click here.

Growing demand, constrained new supply, and rents rising faster than inflation make for pretty positive times in the multi-family industry. According to the National Real Estate Investor, for the next few years, most analysts foresee rising rents, higher net operating income, modest price gains, available capital and an active transactions market. Still, despite the current warranted optimism, there are potential challenges around the corner.

One major concern for the future is that the current state of rent increases outpacing resident income growth are creating affordability issues for residents. Additionally, with the rent-versus-buy value proposition being so in favor of renting at the moment, many individuals are opting to rent single-family homes instead of buying or downsizing to an apartment. Finally, active investor interest in multifamily is driving fears of overbuilding as well.

To read the full article from the National Real Estate Investor, click here.

As vacancy rates remain low and rents continue to grow, the multi-family sector of commercial real estate continues its dominance. However, renters could start shopping for deals in the flat housing market while the cost of renting continues to rise. According to the National Real Estate Investor, at the moment, doubts in the housing market and the broader economy are keeping many Generation X and older Generation Y renters from shopping for homes, but that uncertainty won’t last forever.

Apartment owners should be mindful of competition from the housing market as home prices are beginning to stabilize and even rise in some instances. Even including closing costs, taxes and down payment, home ownership is once again beginning to look like a more and more viable option. As it stands, buying a home in the current market becomes a break-even economic proposition compared to renting after holding the property for just two or three years.

To read the full article from the National Real Estate Investor, click here.

Though apartment rents continue to grow across the country, they have slowed from their peak pace during the summer of 2011. According to the National Real Estate Investor, it is predicted that average apartment rents will settle into a steady pace of growth over the next few years, similar to rental markets in the mid- 1990s, as occupancy rates stay very high. As it stands, close to 95% of apartments are currently occupied after the slightest of a dip in July.

The apartment sector remains the hottest in commercial real estate, but continued economic uncertainty will put a strain on further growth in occupancy rates. Still, with occupancy rates being so high, new construction has come back into the fold as it is predicted that developers will open 87,000 new apartments in 2012, with nearly two-thirds of them opening in the second half of the year. Approximately 129,000 units will go online in 2013 as well.

To read the full article from the National Real Estate Investor, click here.

Apartment vacancies fell to 4.9% in the first quarter, the lowest rate since the fourth quarter of 2001. According to Reis Inc., national vacancies have improved beyond the benchmark 5% level used as a rule of thumb by apartment landlords: for most markets, once vacancies tighten below 5%, effective rents tend to spike as landlords perceive that tight market conditions allow for greater pricing power. With overall vacancies below 5%, expect rent growth to continue to accelerate.

Net absorption was also up 36,484 units and asking rents rose 0.5% from the previous quarter and 2.2% year over year. Adding to the strength of the sector is the lack of new supply being created. Only 7,342 new units came online in the first quarter, the lowest total since 1999. Still though, it is predicted that 2012 will see about 70,000 new units, about twice as many as 2011. This should lead to a slight increase in vacancies by the beginning of 2013.

To read the full article from the National Real Estate Investor, click here.