Torto Wheaton Research completed a research report, entitled “A Case for Investing in U.S. Apartments” which was published last week by the National Multi Housing Council.
The group identified 7 Key Factors in Apartment Investing:
* Apartments have a long track record of having the highest risk-adjusted investment returns compared to other property types. The sector has proven to be most resilient during economic downturns, delivering superior returns during recessionary periods.
* Apartments have the most efficient cash distribution, due to low capital expenditures and technical improvements.
* Apartments have a lower cost of capital and wider availability of debt capital; apartment investments can support more debt with the same level of risk.
* Apartments operate in a favorable, transparent, and market-driven regulatory and taxation environment. In addition, apartments have shorter leases than other property types, allowing them to adjust more quickly to changing market environments.
* Apartment properties vary widely in terms of age, size, quality, and location, creating a broad spectrum of opportunities and possible investment strategies, thereby providing greater liquidity than other sectors.
* Short-term problems from the current economic downturn aside, apartment market fundamentals are expected to remain positive on a cumulative basis over the next five-to-seven year period. Demand is expected to expand and new supply is expected to subside, creating conditions for moderate rent and revenue growth in most locations.
* Apartments are still under-weighted in institutional real estate portfolios.
For more on the Council’s report, see NMHC Research.