US Multi-Family Apartment Buildings is an asset class for investors seeking superior long-term returns by investing in garden-style apartments in the US sunbelt, like Arizona and Texas – the fastest growing real estate, job and population growth markets in the United States.
Suitability
US Multi-Family is suitable for high-net-worth investors who have mid to long-term time horizons who seek potential compounded returns in the mid-teens range.
Why invest in
US Multi-Family?
Multi-family apartments, as accessed through professional real estate portfolio managers, offer historical above average growth backed by real estate assets.
US population growth has been strong, supported by immigration, with a strong demographic profile, as Millennials (age approximately 17 – 37) is the largest demographic group, growing young families and need affordable places to live.
Families are moving in droves from states, like California, New York and Illinois to states like Texas and Arizona
For example, according to Forbes, Texas gained 12,700 residents in 2021 “due to low taxes, a robust economy, a low cost of living and excellent weather”
Housing shortages in major cities across the US combined with population growth and migration tilts the needle in favour of demand vs. supply.
One of the major drivers of apartment building values is Net Operating Income which can be increased through operators’ ability to raise rents as many US states do not have rent controls.
A major advantage of multi-family is the ability of the operator to acquire buildings trading below market rents due to poor management and negligence and improve the quality of the building and units to make the building a better place for families to live and justifying higher rents. This is referred to as “Value Add”.
Most have annual distributions projected in the offering memorandum based on profitable of projects.
We primarily focus on limited partnerships for US Multi-Family and help investors to choose properties with strong metrics and to diversify holdings geographically.
To learn more, take the US Multi-Family PD&E Mastery Series Class and hear from a multi-family professional.
Risks & Volatility
- Understanding risks and volatility is critical to being successful investing in both public and private markets and both share similar risks, but others are quite different.
- Real estate values can experience periods of negative volatility and can be negatively affected during periods of rising interest rates.
- Most multi-family opportunities use leverage to improve returns, which is normal in real estate investments.
- For many US multi-family opportunities, US tax returns must be filed.
Liquidity
- Limited partnerships are illiquid and must be held through the full property transformation cycle which may extend five to seven years.
Potential Returns
- Every investment has many moving parts so predicting the future should be used for estimation purposes only.
- Generally, target ranges for US professionally managed multi-family limited partnerships is in the 15 to 16% range at the time the opportunity is launched but returns can vary widely depending on interest rate movements, financing structures and many other factors.
Taxation
- Annual distributions are generally in the form of return of capital which reduces your adjusted cost base and capital gains on the sale of properties.
