When investors look at real estate as a potential investment, they’re often tempted by the lure of the numerous luxury developments currently going up across the nation. However, some who’ve done the homework are actually moving in the other direction, turning their investment dollars toward the affordable housing market. With tight supplies, increasing demand and reliable ROI, affordable housing makes more sense as a smart investment than many people realize. Let’s explore some of the reasons why this is so.

Increasing Demand

In almost every city across the United States, rents are climbing, even skyrocketing. The imbalance is such that a worker earning full-time at minimum wage can no longer afford rent anywhere in the country, according to the Washington Post. While fewer people can actually afford the high rents of new luxury developments, the demand for affordable housing is very much on the rise, and this trend looks to continue for the foreseeable future.

Low Supply

As we write this, there are already many more people in the market for affordable housing than there are units to accommodate them. The reason is two-fold, both of which we’ve already alluded to:

  1. Higher rents are driving more people toward affordable housing
  2. Real estate investors these days tend to gravitate more toward luxury properties.

As a result, the affordable housing sector has become something of a “hidden gem” for investors — something in short supply that few investors are paying attention to, adding up to more opportunities and better returns on investment.

Recession-Proof Investment

The affordable housing sector is one of the few investments you can make that is either unaffected by recession or will grow because of it. The reason is simple: a shrinking economy naturally brings a higher demand for affordable housing. (By contrast, an investment in luxury property may yield great returns in a good economy, but may become vulnerable in a recession.)

Reliable Return on Investment

While affordable housing may not seem as sparkly-shiny to investors as other opportunities, there are few markets that yield more consistent ROI. For one thing, when people can afford their rents, they are more likely to pay them. For another, many affordable housing complexes qualify for government subsidies and tax credits of various types, resulting in a more reliable revenue stream. Finally, when tenants do default, vacant units are very easy to fill due to the demand (usually in the form of a wait list).

Strengthening Community and Economy

As if all of the above reasons weren’t incentive enough, when investors put their dollars into affordable housing, they are helping stabilize and strengthen communities by giving average Americans a clean, affordable place to live. As a result, they become less transient and more able to spend their dollars locally. Not only is this a socially responsible thing to do, but it strengthens the overall economy, making things better for everyone (including the investors).

Olympia Management offers a number of investment opportunities in affordable housing across the Southeastern United States. To learn more about these opportunities, give us a call at 256-894-2382.