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CityVest invests in highly selective real estate private equity investment funds.
The real estate industry represents a more dependable opportunity when compared with other types of investments because it offers tangibility. Real estate is something you can touch and feel, stocks aren’t. This idea gives the real estate industry a competitive and reliable edge when compared with other types of investments i.e. buying company stocks.
Regardless of the type of investment, risk is an inevitable factor. Like other types of investments, the real estate industry is subject to change based on economic, political, and social change, as well as fluctuations in the market.
Real estate’s recent momentum does not seem likely to fade anytime soon. For instance, if the stock market were to find itself in another tailspin, like the one that occurred in late 2015, the industry should have enough momentum to benefit investors throughout 2018 if not beyond. Three factors likely to impact real estate investing in 2018 are interest rates, the real estate industry posing a ‘safer’ alternative in comparison to other types of investment opportunities, and positive buyer sentiments.
In June, the Federal Reserve considered the U.S. economy healthy enough to raise short term interest rates by a quarter point. Rising interest rates affect millions of Americans from home buyers to credit card holders, however interest rates for mortgages are not expected to rise for some time. This is a gain for real estate investors, including prospective homebuyers seeking investment opportunities in attractive neighborhoods and favored geographical locations. While interest rates for mortgages remains low, it makes sense for people to strike now on the real estate investment front. Affordable borrowing means more purchasing power! Please see the article titled, “Interest Rates 101” for information.
The central bank and U.S. Economy are on solid enough ground for many companies to need more space. This in turn supports real estate investment trusts (REITs).
A REIT is a company that owns or finances income-producing real estate. REITs allow anyone to invest in portfolios, and as a result stock holders of a REITs earn a share of the income produced through real estate investment without having to purchase or finance property. REITs benefit from a growing economy because consumer spending is encouraged which incentivizes companies to hire new employees and expand. REITs thrive on higher occupancy rates, attractive rental yields and a healthy growing economy.
So far, this year REITs have surpassed the broader market. In April REITs were up 2.13%. One factor, being positive fundamentals, allow projections for REIT earnings to place in mid-single digit range by the end of 2017.
W.P. Carey, one remarkably performing REIT, pays a pretty generous dividend, which recently yielded 6.35%. More importantly, that payout is on a very sustainable footing because of the consistency of the company's cash flow and its conservative payout ratio, which was just 76.7% last year. In addition, W.P. Carey maintains a balance sheet, complete with an investment grade credit rating and sustainable leverage metrics, including 49.7% debt-to-assets and 5.8 times debt-to-EBITDA according to Matthew Dilallo in 3 Top REITs to Buy in 2017. Please see the article titled, “How to Start Investing in Real Estate” for more information regarding Real Estate Investment Trusts (REIT).
The housing sector is viewed as a more conservative investment opportunity as volatility in the stock market persists. Investors are less likely to engage in high-risk/high-reward options, and are more inclined to pursue safer investments with little risk and a promising return rate.
Take for instance home flipping that spiked in more than 75% of U.S. markets in 2015. A home flip is defined as a property that is sold in an arms-length sale for the second time in a 12-month period. According to the RealtyTrac’s 2017, first quarter, Home Flipping Report, “33.3% of all single family homes and condos flipped in the first quarter of this year were purchased by home flippers with financing. This is up from 31.9% in the fourth quarter of 2016 and up from 29.5%% in the first quarter of 2016 to the highest level since the third quarter in 2008 at 37.6%”. This is a great example of investors looking for ways to profit from buying homes versus buying stocks. Please see the article titled, Choosing the Right Investment” for more information on buy-and-sell/flipping investment strategies.
Real estate investing gained secure footing most likely due to signs of volatility in the stock market. One could argue that this advancement correlates to recent appreciation rates (purchasing something today with the likelihood of it being worth more in the near future). Nevertheless, risk-averse investors identified an opportunity to protect their portfolios with physical assets (single family homes).
With the U.S. economy and stock market soaring, an increased level of confidence for people to buy homes and invest in real estate is on the rise. According to the CBRE Americas Investor Intentions Survey 2017, the notion of increased U.S. economic growth means that investor sentiment for commercial and residential real estate is up from 2016 despite potentially rising interest rates.
Given recent discussions of bear markets, average sales prices of single family homes in August of this year increased by 6% compared to July, and median sale prices are up 2% when compared with median sale prices over January through August of last year. The bear markets being on the move are incentivizing people to invest in real estate despite low trends following the housing market crash.
Real estate investment continues to have a prosperous run with investor sentiment being positive. This is unlikely to change despite any potential stock markets decline. To conclude, now is a good time to invest in real estate.
Every CityVest investment undergoes a thorough due diligence process by our experienced underwriting team. Of the hundreds of projects reviewed each month, fewer than 1% are approved. CityVest can help you:
You benefit through professional investment structures, which target passive returns for our investors in a range from 10% to 25% - often with a preferred return.
CityVest pre-screens investments for you through our underwriting and due diligence process. We partner with institutional investment funds and sponsors and we seek a preferred rate of return.
Since real estate investments typically generate cash flow income, while common stock does not, real estate valuations tend to be less volatile and less sensitive to market risk factors.
CityVest will handle all of the accounting and administration of your investment, while you can monitor the returns.
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