How can property upgrades help real estate investors navigate periods of uncertainty and monetary tightening?

Dana on April 25, 2022

How can property upgrades help real estate investors navigate periods of uncertainty and monetary tightening?


Real estate helps as a proven diversification component in an investment portfolio with stable cash flow and future returns, and it is especially appreciated by investors during times of uncertainty.

Such periods of uncertainty are in most cases temporary headwinds that do not last for long, and these periods have usually been often the best times to invest and to maximize investment returns. After the temporary uncertainty subsides, many investors feel regrets for being hesitant and not investing during these opportunistic times.

Even after the housing crisis in 2008, the real estate investors that achieved the best returns were the ones that invested when the market uncertainty was peaking.

Considering that investing in every piece of real estate will not yield the same returns, and various real estate classes and projects carry different levels of risk, what would be the best way for investors to make outsized returns without making outsized risks?

Given the economy’s strength and the prospect of continued inflation, the Fed is expected to tighten the monetary policy and inflationary trends have historically resulted in a higher 10-year Treasury yield. Persistent supply chain constraints, energy shortages, and growing commodity costs, contribute to the heightened inflation readings that are expected to considerably slow down in the second half of 2022.

Multifamily and industrial are two of the strongest performing sectors, where growth is outpacing inflation. Unlike traditional bonds, which have fixed cash flows, real estate revenue streams can increase over time to incorporate the inflation rate.

Even in high-demand segments like residential and industrial, supply is limited. Increases in the cost of land, construction, and labor in an inflationary climate are likely to make new supply less financially feasible, which supports higher occupancy and stronger pricing power for existing assets. Should supply continue to improve and demand slow, inflation pressures may ease later this year. This could impact how rapidly central banks raise interest rates to restrain inflation.

In an inflationary environment, prioritizing assets with shorter lease periods in sectors with strong underlying growth fundamentals might provide the chance to routinely reset rents to current market prices. Shorter-term leases are common in hotels and industrial. Contractual rent escalators are commonly used to manage inflationary concerns in assets with longer lease terms.

With the rising property prices of real estate, value-add opportunities are growing in popularity due to their potential for attractive returns, future expected growth, investment value, and great risk-reward potential.

Residents have a strong affinity for quality outdoor amenities that supplement their lifestyle. Most preferred amenities by residents include fitness center or a gym, discount or free membership to local gym, basketball and tennis courts, rooftop decks, recreation rooms, designated pool areas for adults and children, designated grill area and movie theater. Key amenities include free high-speed internet, children playground, automated alerts for package delivery, mailrooms with mailroom management software, charging stations for electric vehicles, bicycle parking, valet parking and 24-hour security and surveillance.

Investors that will position their properties accordingly, could expect attractive returns even during short-term periods of uncertainty, rising inflation and monetary tightening, due to the long-term shifting market preferences by baby boomers, millennials and Gen Z for properties packed with amenities in high market demand that will provide them with a distinct competitive advantage to outpace inflation, generate attractive returns, and enjoy succulent cash flow in the years to come.

Strategic partner selection

This factor could make all the difference between poor, average, and exceptional returns. Selecting the right strategic partner with a proven nationwide track record that can successfully complete the entire renovation process under the agreed terms, with high quality execution, and without any delays, provides the best value and investment returns for real estate investors.

Seeing the final product of your investment project and getting what you want, on time and without any stress in the process is simply priceless.

Ready to start your next investment project?

Please contact us to learn how we can best help you to turn your next investment project into a success.

Email: [email protected]

Telephone: (954) 570-0300

Address: 850 SE 7th Street, Deerfield Beach FL 33441

About Adivo Construction

We are a national general contractor with over 50 years of combined construction expertise specializing in the value-add improvements of apartment communities.

Our mission is to assist our clients in finding the right balance between capital expenditure and appreciation potential by designing and executing customized renovation programs that are focused on increasing cash flow return and overall return on investment.

We have completed over 100 repositioning projects for publicly traded and privately held domestic and foreign companies in states such as Florida, Texas, Kentucky, Oklahoma, Georgia, South Carolina, Utah, North Carolina, Tennessee, Indiana, Michigan, Missouri, Arkansas, Ohio, Arizona, Nebraska, and Kansas.

Post a comment