Alternative Investments through Real Estate – Dwaine L. Clarke – Clarke Real Estate Group

Foreclosures drive Multi-family Apartment opportunities

Posted on August 28th, 2009 in Professionally managed Apartments apartment investments, employment, foreclosures

Foreclosures are still rising but data shows that delinquencies are not only from subprime loans but also FHA backed and prime loans. As a result of this crisis investors should consider looking a lot closer into professionally managed apartments as demand is more so being driven by employment growth rather than changes in home ownership rates.

Currently the four states with the highest foreclosure rates are Arizona, Florida, Nevada and California which accounts for more than half of the foreclosure activity in the U.S. (based on the second quarter numbers). So what does this mean? My assumption would be that these former homeowners would become renters of professionally managed apartments or move in with family. This creates an argument for investors to consider the vast opportunities in professionally managed apartments during this crisis.

Let’s look closer at unemployment in Arizona, Florida, Nevada and California. Unemployment rates in these states are WELL ABOVE the U.S. average of 9.7% and job loss has been one of the major factors driving foreclosures along with the troubled subprime market.

The other alternative that becomes a factor is the market of single family homes and condos that are available for rent. When the condo market crashed, developers with condos that wouldn’t sell quickly converted them into rentals.

Looking at the demographics in these areas, 5+ professionally managed apartments is dominated by renters aged 29 years and younger while older renters tend to rent single family homes. This is a factor of consideration when determining to construct a portfolio of multi-families in the aftermath of these foreclosures.

Even with renter demand growing in Arizona, Florida, Nevada and California due to foreclosures, single family and condos will pose to be the biggest factor of performance for multi family portfolios.

Other markets that show significant outlooks based on forecasts for employment, personal income and population is Raleigh, Austin and Houston. Looking closely at home ownership rates from the Bureau of the Census determines rentership is rising in these cities.

Employment outlooks is very strong and shows growth along with declining home ownership creates for good professionally managed apartment investment opportunities even in this current economic downturn.

Until my next post

Dwaine

——————————————————————————————-