On Friday, 11/6 the new unemployment report was published by the Bureau of Labor Statistics. While the specter of double-digit unemployment has been looming since the beginning of the year, many experts expressed some surprise that the unemployment rate as of October is now 10.2%, mostly because of the (somewhat artificial) economic growth that was reported in September. We at Capital Growth Investment were not surprised, and our prediction of flat growth in the economy is strengthened according to this job report. We believe that the stock market and commodities prices are NOT expression of the economic growth but actually the result of a weaker US dollar.
So what can the savvy real estate investor can do now? One solution is to invest in a segment that is not dependent on the labor market, such as student housing real estate. As more and more young Americans can not find jobs or recognize the pending difficulty to find work following their studies, many are making the decision to invest in their further education. It is clear by the graph below that enrollment rates increase as the economy deteriorates:
Our newest target market for student housing is Texas A&M University in College Station, Texas. This university is a classic profitable real estate market:
-- 48,000+ students enrolled in the last year
-- No requirements for the students to live on campus at any stage.
-- 10% of the student are foreign nationals.
-- Average occupancy of off-campus housing is 94% and rising.
-- Rent value on the rise 3%-4% year after year.
The multi-unit segment of real estate investments is where the real cash flow is. The opportunity to increase the cash flow will come from negotiating the purchase price down, eliminating expenses, tightening the operations of the property by installing a skilled and experienced property management company, and increasing the rental income. Our team in College Station is well skilled in locating pocket listings that are way under market value, through direct negotiation with distressed owners. These properties are yielding a very attractive cash on cash returns for our investors.
CGI is offering an investment opportunity for those who would like to invest in a low-risk apartment building:
•Built in 2004– the newest property in the neighborhood
•This property has consistently been at 100% occupancy since being built
•8 efficiency units at 488 sq ft, 8 loft units at 675 sq ft
•Opportunity to raise rents at the end of existing leases– current rent rates are significantly below market rates
•All units come with full appliance package, including washer/dryer, dishwasher, refrigerator. Efficiencies have high-end ceramic tile, lofts have laminate wood flooring on the first floor and carpet on the second flood. Wine fridges in certain units.
•Units are individually metered. Owner pays only water and trash.
•Owner is highly motivated– asking price is $815,000; original purchase price was $815,000.
•A tremendous opportunity to acquire an A class property for a B class price!
If you would like additional on this investment opportunity, or to learn about some of our other offerings, please click here.
