Top Investment Firms Continue Betting On Growing Rental Market - Are Any Opportunities Left For Retail Investors?

It’s no secret that housing has gotten expensive during this period of high inflation. Rents have increased by a median of 11%, and home prices have soared by roughly 19% since 2021. Many factors lurk behind the increase, like ending eviction moratoriums, low interest rates and ever-growing demand for limited properties.

However, one of the more controversial drivers of increased housing costs is Wall Street. Many Wall Street investment firms, including Blackstone Inc. BX, have been buying single family homes throughout the country to rent them for profit. Wall Street’s increased interest in real estate also provides investors opportunity via real estate investment trusts (REITs) like AvalonBay Communities Inc. AVB and crowdfunding sites, including CrowdStreet and Arrived Homes.

Related: Fractional Investments In Rental Properties Now Available

Blackstone is also expanding into the college rental real estate market since it will acquire all outstanding shares of American Campus Communities Inc. ACC stock for $65.47 per fully diluted share in an all-cash transaction valued at approximately $12.8 billion, including the assumption of debt. American Campus Communities is a leader in providing rentals to college students.

It owns 66 properties in 71 leading university markets like Arizona State University, the University of Texas at Austin and UC Berkeley. These properties are either on college campuses or within walking distances to the campuses, making life more convenient for students.

Coincidentally, American Campus Communities has a foothold in one of the fastest growing real estate markets in the country, the Sunbelt, which includes regions like Arizona, Texas and Florida. Rents in Phoenix and Miami have increased by 18% and 39%, respectively. Blackstone's acquisition will help it diversify its types of real estate holdings in these red hot markets.

See also: Investors Set Sights On Mobile Home Parks As Demand For Affordable Housing Surges

Things might seem tough for many renters as well as first-time homebuyers. Blackstone has realized that unaffordable prices are negatively impacting the average American. It has created April Housing, an organization dedicated to providing affordable housing complexes nationwide.

Rents at April Housing properties are fixed by government regulation via the Low Income Housing Tax Credit (LIHTC) program. The LIHTC was created during the 1986 tax reform, and it provides tax credits to developers who build affordable housing units, including apartment buildings. To qualify for this credit, properties must pass one of these three tests.

Want to Share in Wall Street’s Profits? Consider These two Residential REITs to Earn Potentially High Returns

AvalonBay Communities Inc. AVB

AvalonBay Communities is one of the largest apartment REITs since it owns over 275 apartment communities nationwide. Many of its properties are located in large metropolitan areas like San Diego, Washington D.C. and Seattle. Compared to similar firms, it has a higher-than-average net profit margin of 56%. Its debt-to-equity ratio is 0.76, meaning that it can effectively manage its debt obligations.

Equity Residential EQR

Like Avalonbay, Equity Residential EQR is another large apartment REIT. It owns 310 apartments with a total of 80,000 units and has a presence in major markets like Southern California, New York and Boston. Similar to AvalonBay, it’s profitable since its net profit margin is 81.57%. It’s also benefiting from rent increases as the three-year net income growth is 26.56%, which is higher than most competitors.

Gain Real Estate Exposure With These Crowdfunding Sites

Arrived Homes 

Arrived Homes is a relatively new crowdfunding platform and it’s unique since it focuses on single family homes. It helps investors of all backgrounds break into real estate since you can buy shares of single family home projects with a minimum investment of only $100. Investors can also use a self-directed IRA to invest in Arrived Homes offerings.

It provides investors with multiple ways to realize returns, which include rents and property appreciation. Returns can vary, but the average dividend has been between 5.4% and 7% per year. Investors could potentially earn higher returns, since Arrived Homes focuses on single family homes, which are currently seeing extremely high demand.

Crowdstreet

CrowdStreet is a tried and true crowdfunding platform. Unlike Arrived Homes, it has a greater variety of investments, letting investors buy shares of commercial and residential properties. One of the other major differences is that it’s only available for accredited investors, and most offerings require a minimum investment of $25,000.

Investors can also use a self-directed IRA to invest in Crowdstreet offerings. This platform has had an average internal rate of return (IRR) of 18.3%.

See also: Benzinga's Favorite Real Estate Investment Offerings

Final Note

Inflation has been ramping up over the last year and was measured at 8.5% in March 2022. It’s especially impacted the housing market, since rents and home prices have skyrocketed.

Wall Street firms like JPMorgan Chase & Co JPM have also played a role in these price increases. They have been able to buy homes in cash and outbid the average buyer. Luckily, investors can still find opportunities during ever-increasing rents and home prices.

Photo by Paul Kapischka on Unsplash

Posted In: Alternative investmentsApril HousingArrived HomesCrowdstreetreal estate crowdfundingreal estate investingREITReal Estate