Why Multifamily Investments Are So Resilient In A Recession
Many analysts believe a new recession is imminent. If so, what makes multifamily real estate stand out as such a solid recession proof investment?
Once the data shows up, there is a chance we may find we’ve already been in recession territory. Even if it doesn’t hit for another year, it’s just smart to have portfolios prepared in advance. There may be some other ultra-conservative traditional investments that have been run to in the past. Though often they leave investors with negligible yields and low liquidity. Very rarely do they offer great tax benefits and the steady cash flow prized during these economic times. This is where multifamily property investments can really shine. Discount retail and mixed-use properties with rental apartments and some shopping may fall into this category as well.
The Constant Need for Shelter
These assets aren’t just good for preserving wealth and gaining tax benefits. They can thrive and benefit from even better performance during tougher economic periods.
Why? Because shelter is the most basic human need. Ask any survival expert. If your plane goes down in the mountains, snow, jungle or on a desert island in the ocean – your first mission is to find shelter. You can survive a lot longer without food and water than shelter.
People will always need somewhere to live. Even when they can’t afford to buy homes, or travel in Airbnb pads, they will rent.
In fact, in a recession, more people will be added to the rental pool because they can’t get mortgage loans to buy. More will be dumped into the rental pool as they shed their own homes to avoid capital losses or get foreclosed on.
It’s the Last Bill to Go
If money gets really tight people will start missing credit card payments. They might skip health insurance and just let medical bill collections stack up. They may miss car payments, tighten up on shopping and go on a lean diet. The last thing they can afford to be late on is their rental housing. So, of any industry, this is the safest.
The First to Rebound
When the economy does bounce back, these assets are some of the first to benefit too.
Even in good times, the credit hangover means many will have to keep renting for a decade. Yet, their ability to pay increases and so does property performance. Rents can be raised along with tenant credit quality, resulting in higher yields and asset values.
So, whatever you are invested in today, seriously consider the advantages of multifamily for protecting your wealth and portfolio performance for the years ahead.
ABOUT THE AUTHOR
Bill Zahller is the Managing Partner of Park Capital Partners, LLC and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Partners, LLC in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalPartnersLLC.com for more information.