Why Do It
In general, rental property is better positioned for this downturn than most other properties. According to the National Multi Family Council, U.S. apartments have provided the highest risk-adjusted long-term returns of all real estate asset classes and with less volatility.
- Because investment income property is a cash flow business it has benchmarks and standardized methods for determining value. Cash flow provides the investor with an objective evaluation tool.
- Leases are generally one year, rental income makes relatively quicker adjustments than long term AAA leases or larger shopping malls etc. Apartment buildings have 12-14 month development cycles and can react in a timely fashion to the needs of the market place.
- Apartments have a lower cost of capital and availability of debt capital thanks to Fannie Mae and Freddie Mac. Its a matter of policy.
- Demographic trends are favorable. As a result, demand for rental housing in the U.S. is expanding at the strongest pace since the mid-1980s. 3 million new renter households were created as a result of new household formation, declining rate of home ownership, foreclosures bringing new renters to market and the echo boomers coming of age. Continue reading this post