email: brian@higinvestor.com

office # 616-975-9770

cell/text # 310-403-3892

 

© 2019 by Hamrick Investment Group, LLC

Why the Stock Market makes me Love Apartment Investing

August 26, 2015

With the recent turbulence in the stock market, I thought it would be a great time to share my top 5 reasons for having Commercial Apartment Real Estate in your portfolio:

 

1.  Historically Low Volatility - Commercial Apartment Real Estate is one of the most stable of commercial asset classes.  Even though apartment valuations can be affected by economic cycles, it’s really the population cycle that provides safety and stability to apartment values.  Apartment Real Estate's historically low volatility compared to other investments is illustrated in these two charts:

 

 

Apartments were also the first of the commercial assets to bounce back after the great recession.

 

2.  Demographics support continued rental growth in the U.S. – The two largest demographics in our country’s history are converging on the rental market and there won’t be enough supply to meet demand.  76 Million Baby Boomers are beginning to downsize their homes and increasingly choose to rent.  At the same time, there are 72 Million Echo Boomers (Millenials) who are putting off the purchase of a home and renting longer.  Immigration will also boost apartment demand in the foreseeable future.  (Even if Donald Trump becomes president!)

 

3.  Reliable Cash Flow Streams – Apartments can provide steady and reliable cash flow due to the number of residents and the management’s ability to raise rents, control costs, and maintain occupancy.  

 

4.  Inflation Hedge – As leases are renewed every year inflation is factored into the rent increases.  Depending on location, market conditions and tenant demand this increase can offset inflationary factors.  Even in the deflationary period of the past several years, rents have increased nationally by more than 3% a year.

 

5.  Portfolio Diversification – Apartment investing provides portfolio diversification at a low relative risk level.  The wild up and down swings we see in the stock market just don't happen in Commercial Apartment Real Estate.  I like to think that's because the value of apartments isn't based on emotion, or the whims of the market, but rather on strong fundamentals that are entirely within our control.  I'm referring to the Net Operating Income, which can be controlled & improved through key factors including strong management, cost controls, and rent increases.

 

If you've considered adding Commercial Apartment Real Estate to your investment portfolio, I invite you to email me at brian@higinvestor.com, call me at 616-975-9770, or visit my website at www.HIGinvestor.com

 

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