In the market for a different investment? Think REITs. Multifamily REITs—real estate investment trusts focused on the apartment market—rebounded in late 2001, despite a sluggish economy. Performance was up 7.8 percent for the year through mid-December, according to the National Association of Real Estate Investment Trusts. Impressive, indeed.
You may want to consider adding a multifamily REIT to your portfolio. It’s an easy way to gain diversification beyond stocks, bonds, and mutual funds. In addition, it’s an opportunity for you to become a real estate investor without taking on the daily headaches that many apartment landlords must face.
Demographics Favor Apartments
Demographic forecasts for jobs and lifestyle mobility suggest solid long-term demand for rental housing, even though near-term needs may be affected by rising unemployment. Housing for a highly transient population is one of the essential, non-discretionary expenses that hold up well. Here’s another plus: high operating margins result in low requirements for break-even occupancy.
Demand Should Remain Sound
In affirming its ratings and outlooks on 10 to 12 multifamily REITs, Standard & Poor’s concluded the new apartment supply is expected to decline, while demand should remain relatively sound. Generally, these REITs are very competitive because of recent apartment construction and ongoing professional management. Balance sheets are in good shape and debt schedules are controllable, according to S&P.
More Affordable Apartments Urged
The National Association of Home Builders recently urged Congress to stem the growing shortage of affordable rental housing for low- and moderate-income families. If the proposals are adopted, the multifamily REIT sector could become even more attractive as an investment. IBI
