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Investors with new money to put into the market may weigh the potential opportunity to buy near the bottom against the risk that this isn’t really bottom yet, or that the recovery will be more sluggish than expected, or that there are other markets—as yet unidentified—that have more potential. Timing is less important in the long run than selecting the right property in the right market, within a consistent investment strategy. Having said this, we believe some markets are looking favorable for new investment.
Property values are recovering regionally, and poised for recovery on a national basis. We also believe that real estate is a good investment over the long term due to low volatility and other factors. In recent years, real estate has outperformed equities, largely due to its relatively low volatility. Move-in quality “investment grade” properties at the low end of the price spectrum yield the highest cap rates. With mortgage rates as low as they have been in over 40 years, most markets in the US offer properties with break-even-or-better investment economics, assuming the investor can secure financing and establish reliable rental income.
Real estate values have outperformed equities over recent years due to the collapse in the stock market. However, even as the stock market recovers, rent-generating investment properties can generate exceptional returns on investment.
