Worried about high inflation and economic uncertainty? Here is the perfect solution!
Worried about high inflation and economic uncertainty?
Here is the perfect solution!
Economic uncertainty, high inflation and recessionary periods come and go, but they can harm financial portfolios in the long run and put impacted investors in tremendous distress.
However, there are genuine prospects for long-term investment for smart and well-informed real estate investors. People have made multifamily investments for decades in order to diversify their portfolios, increase equity, and obtain tax-advantaged passive income.
The evidence is overwhelming when you look at how multifamily real estate performed throughout prior recessions.
Where is the best place to put your capital to work during periods of high inflation and economic uncertainty?
Strong overall performance can be achieved in both good and poor economic times thanks to the inherent return components of current income, income growth, compelling risk-adjusted returns, and lower volatility.
Several factors including low supply, shortage of more than 5 million homes in the US to meet market demand, high price competition in single-family housing, flight to quality housing, migration to Sunbelt states and demographic issues of downsizing Baby Boomers combined with the affordability issues for purchasing a new home of Gen Z and Millennials that decide to rent apartments in multifamily properties that provide the lifestyle they crave for, are all creating an immense additional demand for multifamily housing.
Over the last 12 months, a combination of labor shortages, supply chain disruption and economic growth, and the energy crisis sparked by the war in Ukraine pushed inflation to its highest rate in the last 40 years. In commercial real estate, the impact was largely felt in new construction, where materials drove project costs up significantly.
Worried about high inflation? Look no further, this is the best hedge!
Global pandemics, supply and demand, fiscal policy, corporate policy and manufacturing costs can all lead to inflation.
Inflationary pressures will continue to impact construction, material and labor costs. As a result, existing assets will likely benefit from demand shifting in their favor.
If you’re concerned about what inflation can do to your investment capital, real estate inflation-hedging investments are the best place to put your capital to work. One thing that generally keeps pace with inflation, and even surpasses it, is rental income from investment property. In this sense, multifamily as the strongest leg in the US real estate sector and the Sunbelt states are your safest bet.
Unlike stocks, bonds and mutual funds, investing in real estate can make inflation actually work for you, increasing your income as inflation rises. When inflation grows, a smaller expense bill is often outpaced by the leap in income caused by growing rent checks. Oftentimes, this effect can drive greater cash flow and profits in an inflationary environment.
Strong fundamentals are firing on all cylinders!
The multifamily market is posting the best performance in its history. Rental demand is skyrocketing, especially in the Sun Belt region, and rising property values are creating incredible returns for multifamily investors.
Which multifamily markets are expected to grow the fastest? Generally, prices tend to appreciate where jobs are available and where migration rates are the highest. The highest increases were seen in more affordable secondary metro areas with lower rents and usually good job growth.
Companies and workers are expected to keep a healthy pace of migration to secondary markets with lower cost of living and lower office rents. This makes multifamily values to increase faster for suburban properties than urban ones in major metros. Hence, patient and creative investors that are willing to invest in value-add opportunities in secondary and tertiary markets are very likely to be awarded with substantial above market average returns.
Developers and investors are very optimistic about the prospects of cities like Dallas, Austin, Atlanta, Charlotte, Nashville, Miami, and Salt Lake City, based on the construction, business, and migration activity.
The transfer of people from cities like New York to smaller markets like Tampa in recent years has created opportunities in the latter. Places like Phoenix, Atlanta, and Charlotte will have the biggest increase this year as rising prices for important asset types are fueled by employment growth, population emigration, and appealing market dynamics.
Investments in necessities like multifamily housing have historically fared better in economic downturns than other asset classes. It’s crucial to keep in mind that a multifamily real estate investment is fundamentally an investment in the demand for basic shelter.
As a result, it is one of the last two essential expenses people cut during periods of extreme economic crisis, along with food. People will give up entertainment, luxury, fine dining, travel, and so much more when they are threatened with homelessness in order to maintain a roof over their heads. Therefore, multifamily has outperformed other commercial real estate types throughout previous periods of uncertainty or economic slowdown and will continue to do so in the following years.
Ready to start your next project?
Please contact us to learn how we can best help you to turn your next investment project into a success.
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.