Apts. In Top-Tier Suburbs Bring Top-Tier Returns

September 14, 2016

Apts. In Top-Tier Suburbs Bring Top-Tier Returns

SEPTEMBER 14, 2016 | BY PAUL BUBNY | GlobeSt.com

For the highest risk-adjusted returns regardless of the term of the investment, look to multifamily assets in affluent suburbs within high-growth metropolitan areas, according to MPF Research.

The conventional wisdom on risk-adjusted returns for multifamily assets has been mistaken, says MPF Research. The truism that apartment properties in CBDs will produce the highest returns is at odds with an MPF/YieldStar Research study showing that affluent suburbs within high-growth metropolitan areas produce the greatest rewards for any investment period.

The study examined apartment investment returns on privately owned, institutional grade real estate across the top 50 markets using data from the National Council of Real Estate Investment Fiduciaries. Real estate was grouped into suburban or downtown locations in metros with high or low levels of job growth.

Suburban real estate was then divided into two groups: those with monthly rents above the metro average and those with rents below the average. Those with higher rents posted the highest risk-adjusted returns over a three-year, five-year, 10-year or 15-year period, with top-tier suburbs beating out top-tier CBD assets by 30 basis points in the case of a five-year hold, according to MPF’s report.

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Gil Armour, CFP
February 3, 2016

I have been using Blue Vault Partners for the past five years.  I have found them to be a valuable, unbiased resource when it comes to evaluating and comparing non-traded REITs.  The reports help me analyze which sponsors are doing a responsible job of managing their offerings.  This allows me to limit my REIT recommendations to only the most competitive products, and then track those REITs throughout their life cycle.