Bigger Pockets: Institutional Investors are Buying Up Affordable Housing in Droves – Are They on to Something?
The real estate market is on the verge of shutting down. The massive jump in mortgage rates over the past 18 months has priced out many new buyers.
For existing homeowners, it’s reduced a willingness to move. Why leave a home with a 3 percent mortgage when you’d have to pay 7 percent or more on a new place? While some new homes are being built in some markets, it’s not enough to meet demand.
That’s led to a push for investments in affordable housing. Large investors are getting into the trend, including Nuveen, the investment arm of the Teachers Insurance and Annuity Association of America (TIAA), and Goldman Sachs (GS).
While smaller investors may ignore affordable housing due to low economics, it does offer a recession-resistant part of the market. And, bought at the right price, the steady returns on both price appreciation and income can deliver higher yields over time.
Plus, there’s also government support. So, even if a property has below-market rents for an area, the property owner will receive cash that it needs.
Individual investors can likewise buy affordable housing properties. It even offers one of the least expensive ways to start investing in today’s real estate market.