Real Estate’s Long Boom

Experts see rising rents, low vacancies, and decades of strong demand for apartments

The 2016 prospects for US equities are dim with analysts forecasting just a 3% return. And you’ll need a lot of antacid because volatility is going to be high. Given the stock market dropped 6% in just the last week, some would say 3% is optimistic — and hardly worth all the downside risk.

Unfortunately, the outlook for bonds and other fixed income is worse. Analysts are actually predicting negative returns — meaning the near-zero rates on bonds will be less than 2% inflation.

So where can investors find solid returns? The good news is in real estate –specifically apartment complexes.

According to a recently published report by widely respected GaveKal Research, apartment complex investors should be excited due to several key statistics:

  1. Rents are rising at 3% YoY
  2. Vacancy rates have seen a dramatic decline
  3. New home construction continues to lag behind demand (new household formation is steadily rising)

As a result, the report concludes, “we suspect vacancy rates will remain low, keeping upward pressure on rents.

Rising rents and lower vacancy rates are expected to continue which are big positives for apartment complex investors.

Demand for apartments will remain strong for decades

In related news, two separate reports by Joint Center for Housing Studies at Harvard University and Urban Institute found that demographics trends will continue a shift towards lower homeownership for many years ahead. Older households, many of whom own their homes, are being replaced with younger households and minority households, who are less likely to own their own homes. Financing the purchase of a home is still difficult, especially for these households. According to the reports, this trend will lead to strong demand for apartments for the next 10–20 years.

From 2010 to 2030, new households will choose rental housing over homeownership by a wide margin — Urban Institute

How can you take advantage of this opportunity?

Investing in stocks and bonds is easy. Real estate can be a little more tricky. The big question for many people is “How can I invest in real estate or apartment complexes without becoming a landlord?” If you have the same question, I invite you to learn a little bit about, OpenPath Investments. We have an unique, proven model and 10-year track-record delivering 20%+ IRR. You can visit us at OpenPathInvestments.com. And feel free to contact me directly at david@openpathinvestments.com.

In the meantime, I think you will find this short video super helpful.

A couple other posts that I think you will like:

My Next Google: A perspective from employee 75

The single best investment you can make for 2016

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