This is an excellent question based on the fact that property values have surpassed levels of pre-recession in 2008…Is it a time for a pause?
How do we evaluate how we are diversified in the market?
Are there basic and easy ways to prepare for a market downturn?
In December of 2019, we were in the 126th month of a recovery cycle in the US and 120 months was the previous record while 80-84 months is the general average. Money is currently flowing into apartment real-estate and many markets are overvalued by out-of-state investors.
So….are apartments recession proof? It depends but there are some basic rules to follow especially considering being a passive investor in a large deal…MAKE SURE that the deal maker has the following 3 solid fundamentals when purchasing apartments for PROFITS!
-The property MUST CASH FLOW
-There must me long-term, fixed rate debt on the property that covers the life-cycle of the business plan (5+ yr)
-The operating account for the property should have cash reserves to cover 6-months of debt payments and ~$1,000 per unit of cash set aside for unforeseen problems
75 million baby boomers are headed into retirement and 2 out of 3 millennial’s aren’t buying homes due to the increase in cost and stricter lending practices. No matter what the economy does, everyone usually wants a place to live. A home could cost $1,800+ a month versus $800-1,250 per month for an apartment; those extra dollars can go a long way!
Apartment communities continue to be a solid investment even during the covid-19 pandemic in mid 2020. Owners of apartment communities are still collecting and covering their expenses while making investment returns.