4 Reasons Apartment Investment Properties Will Outperform in 2022

Throughout 2021, the demand for apartments in the United States remained robust as the economy rebounded and recovered from the pandemic. Rising occupancy in rental apartments continued to grow, with the market absorbing 101,132 apartment units according to National Association of REALTORS®. This brought the total net absorption of units to 1.05 million during Q2 of 2020 through Q4 of 2021 (as of October 23rd). This was substantial when compared to Q4 2019 (pre-pandemic), which only saw 38,445 units absorbed according to National Association of REALTORS®.

Multi-Housing News found that the rental property market for 2021 saw the single-family rental sector move ahead of the multifamily rental sector with a 13.9% year-over-year improvement. Still, the multifamily market experienced immense growth, with rents rising 11.4% year-over-year in 390 metro markets in the last three quarters of 2021.

As we head into the new year, it’s forecasted that apartment demand and rent will remain strong, especially in the commercial space where prices are recovering. Let’s look at four reasons apartment investment properties will outperform in 2022.

Commercial Real Estate Market is Rising

In 2021, the absorption of apartments in the real estate market rose substantially and reached its highest level in over a decade. As of October 23rd, 2021, there was a net absorption of 741,592 apartments over 12 months according to National Association of REALTORS®. As we look toward 2022, this sector is forecasted to continue to increase as renters demand more apartments in booming markets like the South Region.

Rent Growth Increasing in Key Markets

As apartment prices are bouncing back after the pandemic, rent growth is rapidly increasing in 127 of 390 metro areas according to National Association of REALTORS®. One state that is showing positive signs of rent growth is Florida in metro areas like Tampa, Palm Beach, Sarasota, and Fort Myers. This is because markets like Florida and the South region are more affordable for renters to live in. As a result, more people are migrating here and increasing the demand for more rental housing construction.

High Mortgage Rates Increasing Rental Demand

As high mortgage rates ease the demand of owner-occupied homes in the market, more individuals will seek to rent apartments. This will increase the demand for rental units and construction nationwide, especially in regions with very expensive housing prices.

Improving Economic Conditions

With 2022 on the horizon, the economy and real estate market continues to improve from the pandemic. Individuals are looking to move into growing markets where there are job opportunities, and their work-from-home lifestyles are supported. According to PwC, the top-ranked real estate markets for 2022 include:

• Nashville
• Raleigh/Durham
• Phoenix
• Austin
• Tampa/St. Petersburg
• Charlotte
• Dallas/Fort Worth
• Atlanta
• Seattle
• Boston

These real estate markets have been able to experience impressive growth due to their retention of economic power and ability to regain jobs lost much quicker amid a pandemic than places like Manhattan and San Francisco.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Should You Invest for Capital Appreciation vs. Cash Flow in 2022?

In today’s current market, there are a plethora of ways real estate investors can grow and maximize their wealth through unique investment opportunities. However, as you begin to diversify your portfolio, it’s essential to ask yourself whether you want to position your investments to grow your capital or to maximize cash flow.

If you’re unsure which is the right investment strategy for you, keep reading to learn the differences and benefits of growth investing and income investing to determine which one is ideal for your portfolio.

What is Capital Appreciation?

Capital appreciation simply means investing in assets that you expect to increase in value over time. It is measured by taking the difference of the investments’ expected future market value and comparing it to its current purchase or market price. The favorability of an asset often depends on its investment objectives and the investor’s risk tolerance. Riskier investments should have the potential to produce greater returns; if they don’t, why would someone take on the additional risk of loss?

There are various types of investments targeting capital appreciation, including:

• Exchange Traded Funds
• Mutual Funds
• Real Estate
• Equities
• Bonds
• REITs

Each of these investments can be classified as either low, moderate, or high growth opportunity investments. Some can even be considered speculative. Investors should determine which strategy is best for their portfolio by asking themselves how much risk they’re willing to accept in order to maximize long-term returns, keeping in mind the fact that high-risk and speculative investments could result in the complete loss of principal.

For example, if an investor seeks to experience moderate growth, they’ll typically invest in blue-chip stocks from companies with an excellent reputation. On the other hand, if an investor is looking to experience higher, more aggressive growth, they’ll find growth stocks that are predicted to grow more than the average market value. Real estate investments that might be considered higher risk investments may be a ground-up development project to build a new shopping center or investing in a project to build a subdivision of new homes.

What is Cash Flow?

Cash flow investing is a financial strategy commonly used by retirees and others looking to invest in assets that generate consistent income on a monthly, quarterly, semi-annually, or annual basis to cover current living expenses or simply supplement their other sources of income passively. This type of investment strategy allows investors to receive reliable dividend or interest payments through mutual funds, stocks, bonds, ETFs, or real estate. Some real estate investments commonly used to produce passive income are stabilized apartment buildings, shopping centers with long-term leases, and single-family rental properties. While it’s not always the case, many cash flow-oriented investments have a lower risk profile. It’s possible to realize capital appreciation on cash flow investments, but the primary objective should be income.

Which is the Better Strategy for Real Estate Investors?

As you will see, capital appreciation and cash flow aren’t mutually exclusive, and you can diversify your portfolio with a combination of the two. If you’re looking to experience both at the same time, real estate is a great investment strategy to focus on as it provides the opportunity for capital appreciation, income, and various tax benefits.

As a rule of thumb, investors should remember that capital appreciation has historically been shown to occur over an extended period, and there is no guarantee your property or investment will gain value. That’s why it’s crucial to research data of where and what you want to invest in to maximize the probability that your investment experience is in line with your expectations.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.

Should You Choose Active vs. Passive Investing?

Are you looking to begin investing in real estate but aren’t sure where to start? Many real estate investors find themselves in this common scenario of trying to figure out if active vs. passive investing is right for them. Depending on your priorities and finances, you may find one is better suited for your lifestyle than the other.

Let’s look at active vs. passive investing to determine their differences and benefits for real estate investors and wealth managers.

Active Real Estate Investing

As the name implies, active real estate investing is a hands-on investment strategy that requires an investment manager or active participant to manage and develop the real estate portfolio. They’ll know when to buy and sell assets and pivot into new real estate opportunities like small apartments, massive complexes, and multiple units.

Active real estate investors commonly purchase properties to make a quick return by either refurbishing and renting the property or fixing it up and flipping the property. It’s a popular strategy to utilize if an investor is seeking more control in negotiations, financing, and property selection.

The downside of investing actively in real estate is the time commitment and expertise required. To be successful, it’s critical to have a thorough understanding of the local market, and depending on the investment strategy, active investors will likely need a team of local professionals that may include attorneys, brokers, title agents, architects, property managers, and several different types of contractors. For the experienced investor, active investing can be rewarding if you have adequate time to dedicate to the investment. First-time investors often assume active investing can be done part-time or as a side hustle to their full-time job, only to find out that their new investment consumes their nights and weekends completely.

Passive Real Estate Investing

Unlike active real estate investing, passive real estate investing is a less involved day-to-day process. Investors can approach passive investing with a direct or indirect strategy.

Direct passive investing is when an investor purchases a property and hires a property management company to ensure tenants live a comfortable lifestyle. The property management company will be responsible for taking care of maintenance, collecting rent, and refurbishing and repairing buildings. In this strategy, the investor’s time commitment might be more limited to regular conference calls with the manager to help make decisions. However, you will still need a solid understanding of the local market as well as a local attorney, title company, broker, and other key professionals to work with.

Indirect passive investing is when an investor puts capital into a real estate syndication or partnership. The real estate syndication is managed by a sponsor who will combine his or her own capital with the capital of multiple investors. This provides the group with greater purchasing power to afford large commercial and residential properties.

The main advantage here is that the investor can receive all the same advantages of investing in real estate without any of the day-to-day responsibilities or time commitments. The right sponsor should have a greater level of expertise and experience in the local market and a team of professionals with a strong track record of successfully executing the chosen investment strategy. Additionally, pooling together capital from multiple investors will allow the partnership or syndication to collectively invest in larger, higher-quality investments or a greater number of investments than any individual investor could do on their own. This may help reduce the investor’s risk through diversification.

Which Should You Choose?

When deciding on whether active vs. passive investing in real estate is right for you, it’s essential to ask yourself which suits your lifestyle best. If you’re seeking more control over investments, want higher-risk, and have the time and skillsets to negotiate and develop properties, active investing may be right for you. On the other hand, if you’re seeking to make passive income, experience potentially lower risk, and spend less time focusing on managing a property, passive investing could be an ideal strategy to grow and maximize your wealth. However, it’s crucial to note; you can do both to diversify and scale your real estate portfolio.

Finding Opportunity. Delivering Results.

MRA Capital Partners offers real estate investment strategies focused on maximizing the internal rate of return through favorable deal structures and the pursuit of non-correlated investment returns. Learn more about our investment strategies by visiting us online. Also, sign up to join MRA Capital Partners’ preferred investor network to learn more about our upcoming unique investment opportunities.