How to Make Profitable Investments Throughout the Real Estate Cycle

Opportunities for profitable investments exist at every stage of the real estate cycle. Here’s how to identify which strategy is best for where the market is now.

During the recovery phase, just after a recession or pullback in the market, there is low demand for housing and high vacancy rates. Prices and interest rates are low, so if you have the liquidity, it’s a great time to buy properties below value, or to refinance.

When the market starts to recover, we enter the expansion phase. New construction begins and interest rates are still comparatively low, so your value-add properties’ equity is ready to capture with a refinance. Reinvest in new development, re-development, or purchasing additional value-add assets.

In the hypersupply phase, the market has become overconfident. An abundance of inventory compared to the demand means prices are ready to decline, and construction slows. This is the tipping point for high sales prices; sell now or buy a stable asset for long-term cash flow to get you through the next cycle.

Time for trouble: the recession phase. Over-inflated growth causes demands to plummet and default rates on mortgages and loans to soar. This is your chance to buy properties for rock-bottom prices, especially distressed sales. Go for value add.

Of course, in order to take advantage of the opportunities offered in any stage of the real estate market, you need to know where we are currently; for an in-depth analysis and “You Are Here” guidance, contact one of our advisors.

Source: Million Acres

5 US cities with the highest cost of living

According to a recent report by Move.org, the Bay Area’s major cities continue to rank in the top five for the highest cost of living nationwide. San Francisco holds the top slot, with New York City close behind, followed by San Jose, Oakland, and Boston. The report measured the average monthly cost for rent (a 1-bedroom apartment), food (groceries and some restaurant meals), gas, utilities (electricity, water, etc.), and internet for each city.

Surprising no one, San Francisco, California is the most expensive, with rent among the highest in the nation; rent makes up 80% of the $4,210.60 monthly cost of living in the city. The city also has some of the highest gas prices at $197.88 per month, though residents who commute via bike or public transit can avoid these costs. Food is expensive, around the 80th or 90th percentile, but utilities are comparably cheap at $123.22 per month, about 30% of the national average. Internet costs are pretty middle-of-the-road compared to other cities, averaging about $66.62 per month.

New York, New York is just $250 behind SF, with an average cost of living of $3,956.11. Food is the problem here, costing over twice as much as San Francisco, at $468.60 per month. Rent is also extremely high, at $3,126.35. Gas is more expensive than the national average, around the median value, at $155.55 per month, and internet is just about average at $62.77. Utilities cost a little less than elsewhere, around $142.84 per month.

San Jose, California is the third most expensive city to live in, with lower rents than SF or New York but high gas prices and above-average food costs. The $3,289.07 cost of living includes $2,555.85 for rent, $186.15 for gas, $359.85 for food, $63.36 for internet, and $123.86 for utilities (significantly cheaper than the national average).

Despite Oakland’s reputation for being cheaper than the City, its cost of living is still fourth-highest nationwide, at $3,212.14 per month, only about $1,000 less than San Francisco. Rent and gas are the highest costs compared to the median, at $2,481.65 per month and $175.95 per month. Food is just a little more expensive than the national average, around the 30th percentile, at $347.33 per month. Internet and utility costs are pretty average, at $65.00 and $142.21.

In the last spot of the top five is Boston, Massachusetts, with New York’s high rent and food costs. An average cost of living of $3,211.51 includes $2,420.26 for rent, $435.78 for food, $145.35 for gas, $62.97 for internet, and $147.15 for utilities.

Source: Move.org

Bay Area cities rank in top 10 for most LEED units

California has more LEED-certified multifamily properties than any other state, over 57,000 units worth, and the Bay Area has over 12,000 of these green apartments and condos, with three cities ranking in the top ten statewide. Just behind Los Angeles, San Francisco ranks #2 for the most LEED units, at 8,090, and San Jose is just two spots behind at #4 and 2,545 units. While Oakland hasn’t quite caught up to these levels, it still ranks in the top ten, at #8 with 1,648 units. 

According to Multi-Housing News, “While LEED certification positively impacts the health and well-being of people, as well as the planet, it’s a valuable feature for investors, as it translates to faster lease-up rates and higher resale value.” Owners of LEED multifamily buildings are primarily real estate investment trusts; AvalonBay Communities, owner of the various Avalon, AVA, and eaves complexes in the Bay Area, and the Essex Property Trust, owner of over 80 Bay Area buildings, hold over 9,000 units between them.

The green housing trend really took off in 2008, jumping from 315 LEED-certified apartments and condos statewide in 2007 to 1,947 the next year. The numbers continued to grow through 2017, with a slight dip last year from 7,378 in 2017 to 6,185 in 2018. The developments still are mostly an urban trend, clustered in and around California’s major population centers, though the report only included communities with at least 50 residential units.

Source: Multi-Housing News