Thursday, May 31, 2012

Multifamily, Rising Apartment Rental Rates Attracting More Real Estate Investors.

21,600' of Multifamily 2 Land Minutes from Downtown Dallas Available for Sale. More Info

Low vacancy rates along with rising rental rates have real estate investors salivating over multifamily, apartment properties nationwide. Low lending rates, access to capital and an increasing supply of rental demand is fueling a surge in new apartment development. The Houston and Dallas - Fort Worth metros are among the top multifamily development targets as job-seekers fleeing high-tax, low-growth states flock to the Lone Star state.

According to an article by Costar, more than 250 private equity funds are looking to invest in multifamily deals. Steve Pogarsky, vice president of multifamily acquistions for BPG Properties/Madison Apartment Group says, "Our investors can't get enough of multifamily. We have to contain their enthusiasm."

Also, Life insurance companies are investing in multifamily projects at an increasing rate. Some of the big players are now investing up to 25% of their portfolio in apartments versus 15%, historically.

Tax advantages and future inflation also make rental real estate more attractive than ever. Positive cash-flow income can often be offset by depreciation, mortgage interest deductions and taxes, making apartment rental income low-tax or tax-free. Savvy investors that increase the rents and value of the property, may often refinance much of their capital out of the investment tax-free, do a 1031 exchange into another property tax-free, or pay a long-term capital gain rate of 15% when they sell.

With the higher taxes chant coming out of Washington, and their penchant for running the printing presses, sooner or later, many experts agree that the value of the dollar will be destroyed, making everything, including real estate more expensive. In fact, in his May diatribe, Bill Gross of Pimco recently recommended the following, "In addition, inflation should creep higher. Do not be mellowed by the affirmation of a 2% target rate of inflation here in the U.S. or as targeted in six of the G-7 nations. Not suddenly, but over time, gradually higher rates of inflation should be the result of QE policies and zero bound yields that were initiated in late 2008 and which will likely continue for years to come. We are hooked on cheap credit just as Wimpy was hooked on Friday’s burgers. As I highlighted last month in “The Great Escape,” bond and equity investors should focus on securities with shorter durations – bonds with maturities in the five-year range and stocks paying dividends that offer 3%–4% yields. In addition, real assets/commodities should occupy an increasing percentage of portfolios.

If you'd like any advice on buying or selling an investment property, I'd be happy to help you.

Troy Corman is the founder of t2 Real Estate LLC, a Dallas real estate firm providing specialized knowledge with a hands-on approach. Specialties include residential real estate brokerage, land and acreage, and commercial real estate services. Contact us today at 214.827.1200 if you need to sell, buy or get your DFW property leased.


Dan said...

Really interesting information thanks! I know that Austin investment property is being bought by foreign investors and larger corporations. The market is definitely getting more competitive.

troy corman said...

Yes Dan, the appetite for apartment rentals in Dallas hot-spots like uptown is fierce. Will be interesting to see if Helicopter Ben revs up the printing press after the dismal jobs report on Friday.