Are you considering investing in private real estate? When the markets hit a downturn, it could be your time to shine.
Just because a real estate bubble caused the last recession (aka 2008) doesn’t mean that real estate values can’t increase — because they can.
In fact, it can be the best time to invest in real estate.
Here’s why: As a whole, real estate can still produce stable income and is less sensitive to volatility. It can also provide high absolute returns across all market cycles.
The 2008 recession was led by real estate because of excess lending in the market and loose standards, according to Origin Investments’ blog, but debt and equity providers have been responsible over the past ten years to avoid another real estate bubble.
Private Real Estate Produces Stable Income
Real estate investing tends to offer predictability during market downturns because monthly rent payments are always due — they’re not tied to the stock market.
In other words, tenants’ rent payments don’t stop. Furthermore, Class A assets, which include new, higher-valued properties in top condition, attract the top tenant base and are a higher indicator of reliable payments.
Private Real Estate is Less Volatile
Private real estate has minimal correlation to stocks and bonds. This lower correlation of real estate to the stock market makes it a great hedge against volatility. Private real estate values don’t fluctuate frequently because they are illiquid and instead tend to grow in value over time.
Private Real Estate Generates High Absolute Returns
An absolute return takes into account appreciation, depreciation and cash flows to measure the amount of money an investment earns over time, and is expressed as a percentage gain or loss on the initial investment. Looking at data from Bloomberg, a $100,000 investment in private real estate beginning on December 31, 2000, would have been worth about $420,000 on December 31, 2019. That same $100,000 investment in the S&P 500 would be worth about $356,000 on December 31, 2019.
However, you must know that there’s a liquidity risk associated with real estate (you can’t just sell whenever you want!). You’re also tied up in a long-term investment, as opposed to selling liquid stocks.
Choose Origin Investments
Origin Investments’ currently has two open funds available for investment: The Qualified Opportunity Zone (QOZ) Fund and IncomePlus Fund. The QOZ Fund is in the beginning stages of building multifamily developments. The IncomePlus Fund’s investments continue to perform well during the pandemic. Monthly collections remain above 96 percent and occupancy is stable.
Its Class A multifamily buildings in growing markets positions Origin Investments to better weather the downturn. Workforce housing, defined as Class B and below, may feel the pinch, as this demographic makes up the unemployed majority. However, Origin Investments chooses to target a more educated, higher-income tenant less susceptible to layoffs with higher disposable incomes, including a savings buffer, so they can pay rent if they do lose their jobs during a down economy.
About Origin Investments
Origin Investments is a real estate investment firm that acquires and builds multifamily properties in eleven fast-growing markets: Atlanta, Austin, Charlotte, Chicago, Dallas, Denver, Houston, Nashville, Orlando, Phoenix and Raleigh.
The firm is Chicago-based, with additional offices in Charlotte, Denver and Nashville. Origin has executed more than $1 billion in real estate transactions. The firm, originally founded in 2007, recently raised more than $150 million for Origin Fund III and is currently fundraising for their open IncomePlus and Qualified Opportunity Zone Funds for accredited investors.
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