Investing in workforce apartment communities means owning apartment or multifamily buildings with rental rates that appeal to a working class tenant.
Demand for housing at the working class price point often increases during a recession as families tend to downsize from a single family home. Lower cost housing options are in higher demand during difficult times.
In the Recession Resistant Fund we target apartment communities within commuting distance from major job centers where jobs are likely to be maintained through a recession. We also look for a strong value-add component meaning we buy apartments that have some minor deferred maintenance or outdated finishes that can be renovated over time and re-rented at higher lease rates. This increases the investment’s Net Operating Income or NOI over time and increases investor cash flow and income while also generating a higher sales price at the eventual exit of the investment.
Supply and Demand Forces
Demand for apartments remains extremely high nationally and new development of apartments is not even keeping pace with the aging stock of apartments that need to be replaced due to age and deferred maintenance. Further, much of the apartment development over the last decade, especially in urban areas, has been in the high-rise luxury space - a product type our fund does not invest in because it is the first to reduce rental rates and experience higher vacancies during a recession.
Affordable housing remains a serious issue in the US and owning working class priced apartments is a good long term investment.