MARKET UPDATE - The Apartment REIT Opportunity

Dear Landlords,

I want to extend a warm welcome to all our new members! We recommend that you start by reading our Welcome Letter by clicking here. It explains why we invest in real estate through REITs and how to get started.  

As a reminder, our most recent "Portfolio Review" was shared with the members of High Yield Landlord on July 3rd, 2024, and you can read it by clicking here.

You can also access our three portfolios via Google Sheets by clicking here.

New members can start researching positions marked as Strong Buy and Buy while taking into account the corresponding risk ratings.

If you have any questions or need assistance, please let us know.

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MARKET UPDATE - The Apartment REIT Opportunity

Last week, the New York Times published an article entitled:

"Apartments Could Be the Next Real Estate Business to Struggle"

Mid-America Apartment

Camden Property Trust

It explains that apartment landlords are today facing surging interest expenses even as their rents are stagnating or even dropping due to oversupply, especially in the once-booming Sunbelt markets.

As a result, some analysts now fear that this could lead to growing loan delinquencies and defaults across the sector, which could then lead to lower property values.

But here's the good news for you...

It really isn't that bad. As usual with media headlines, they are sensationalist because that's how you get the maximum amount of clicks.

But the reality is that Blackstone (BX), KKR (KKR), and other highly sophisticated private equity players are currently investing billions into apartment communities, and they certainly wouldn't do so if they believed the market was about to collapse.

Blackstone is the biggest landlord in the world and they have access to the best market intelligence in the world. Yet, they have acquired $17 billion worth of residential REITs this year alone. Similarly, just last month, KKR (KKR) announced a $2+ billion acquisition, which was its biggest apartment investment ever.

So what are they seeing that these media pundits are missing?

It is three things:

• 1) The oversupply is not that bad and it will soon turn into undersupply.

• 2) Interest rates are expected to drop significantly in the near term.

• 3) Valuations are already low and major downside is unlikely from here.

And the combination of these three things makes apartments, and especially apartment REITs, very attractive investments right now.

Let's discuss each one by one: