Turning Misconceptions into Opportunities: Why you can’t ignore Affordable Housing Investing
There’s a lot of misconceptions around investing in affordable housing. Here are the top three I hear regularly:
- The tenants are awful and wreck the place.
- The areas are war zones that won’t appreciate.
- You don’t make money because the rents are too low.
Since so many investors believe these misconceptions and are afraid of affordable housing, this leads to amazing opportunities for investors like us that understand affordable housing and how to manage it and profit from it. Here’s our reality:
- The majority of our tenants are great people with families that just want a clean, safe place to call home. Sure we have the occasional issue, as expected and mitigated with scale.
- The areas we invest in are thriving communities mainly around hospitals where transportation, community investment, and economic growth and opportunities are prevalent.
- Our rents tend to be market-rate or even higher than market (on average $1600-1700/month). We want to see our tenants paying less than 30% of their gross income towards rent. Some of our tenants utilize Housing Choice Vouchers (Section 8) to achieve that. Sometimes Section 8 pays above market-rate.
In a addition to the bullet points above, affordable housing is also in extremely high demand and there is limited access (less than 3% of new homes built were valued under $250k – affordable housing is scarce). These supply and demand metrics lead to low vacancy and consistent rental growth. Low vacancy and subsidies lead to consistent rental collections.
But don’t just take my word for it. The Pension Real Estate Association (PREA) recently put out a well researched article titled “Can Investors Afford to Ignore Affordability? The Investment Characteristics of Affordable Housing.” I strongly recommend checking it out. It has some great data on why investors can not afford to ignore affordable housing.
Add Single-Family Affordable Housing to your Passive Investment Portfolio
Let’s discuss how you can leverage this opportunity to expand your portfolio. Schedule time with us at your convenience here. We can discuss our current single-family rental funds and explore how they may align with your investment goals.
