Why multifamily investing in the south can help you weather a recession on the upside
You’ll find real estate investment opportunities throughout the United States, but which ones are more likely to yield returns in the face of a recession?
Recent headlines tout the impressive boom in new multifamily construction in Texas, a juggernaut of prosperity in the United States. The state boasts tremendous job creation, low cost of living, and lower housing prices. It’s one of a number of states where people are moving en masse to escape colder climates and economic stagnation in search of better opportunities in the south. It’s known as the Sunbelt region of the U.S., and it stretches from Florida to California and encompasses portions of the Carolinas, Georgia, Mississippi, Alabama, Louisiana, Texas, New Mexico, Arizona, Utah, and Nevada.
Investors, in particular, have looked to alternative investments like multifamily REITs in the Sunbelt region as lucrative, recession-proof investment options and an intelligent way to add diversification to their portfolios. Massive population growth means the demand for housing is high. Investors looking to capitalize on the strength of the Sunbelt economy could see strong performance in the multifamily sector.
Here are the top five reasons you should consider investing in multifamily real estate in the Sunbelt region:
1. Jobs
Seven of the top ten states for job growth are located in the Sunbelt region, which saw between 2% to 3.4% increases in new jobs added from 2017-2018. This job growth translates to a growing workforce which needs housing. One of the major factors companies consider when relocating to a city is the availability of workforce housing like apartment communities.
2. Strong Economy
The Sunbelt is one of the top destinations for retirees and job seekers alike. More people seek out this region because of the strong economy, relatively low cost of living, and affordable housing.
3. Recession-Proof
The Sunbelt region emerged from the economic downturn of 2008 relatively unscathed, thanks to strong-performing industries like oil and gas as well as the technology sector. The Rust Belt and areas that rely heavily on tourism were hardest-hit when the housing bubble burst, while good jobs and less expensive housing could still be found in southern states. Should we see a replay of the 2009 recession, then the Sunbelt population will likely swell again.
4. Multifamily always in-demand
Speaking of demand – apartments are becoming the No. 1 choice of housing for the largest generational cohorts, Baby Boomers and Millennials. For a variety of reasons, more and more people are eschewing expensive-to-purchase-and-maintain houses for the flexibility, lower cost, access to desirable amenities, and ease of maintenance provided by multifamily community life. We call this flexibility of living the “new American Dream.”
5. Value-add multifamily = safer investment, better returns
Investors know that new construction multifamily isn’t necessarily the best option for strong returns. Since “new construction” typically equates to luxury apartments, a risk enters when you talk about a possible recession. When the economy tightens up, so do people’s pocketbooks. Rather than splurging on a high-end apartment, people will look for more affordable value-add apartments, or older, updated communities that boast the latest design features but tend to cost less due to their age. Meanwhile, investing in new developments is riskier, with developers of luxury apartment buildings often forced to offer tenants months of free rent to sign a lease. Value-add communities can out-perform new construction in terms of returns on increased rent and occupancy rates thanks to the lower CapEx required for renovations or improvements to property management.
Invest in multifamily real estate in the Sunbelt Region for only $2,000
You can join the multifamily real estate investment boom for a minimum investment of $2,000. For more information on how to get started in real estate investing in the Sunbelt region, click here or call 512-492-8882. Questions? Email hello@upsideavenue.com 24/7.
