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HISTORICAL APARTMENT PERFORMANCE
From a risk-adjusted standpoint, apartments have demonstrated the highest returns over the last 10, 15, 20, and 30 year periods.
No other property type has consistently performed better.
Apartment returns have outperformed every other real estate sector in most every major economic downturn on record including 80-81, 90-92, and 2001-2003 recessions.
As evidenced by National Council of Real Estate Investment Fiduciaries, apartment appreciation exhibited a 10X multiple from inception of the index in 1983 resulting in a 43% annualized return.
STABILITY – SAFETY – CAPITAL PRESERVATION
Multifamily assets have historically maintained value better than other real estate asset classes due to consistent demand, predictable cash flows, and robust liquidity in the market buoyed by both lenders and buyers.
Apartment returns are largely uncorrelated to stocks and bonds providing for enhanced portfolio diversification and reduced portfolio volatility.
DEPRECIATION / TAX ADVANTAGES
Multifamily apartments receive the highest depreciation deductions compared to any other real estate types due to the IRS allowing it to depreciate over a 27.5 yr schedule as opposed to a 39-yr. 1031 Tax Deferral and Cost Segregation are additional advantages.
Apartments are considered one of the best hedges against inflation due to rents increasing with CPI increases. Specifically, due to relatively short leases, cash flows from apartment assets can adjust more quickly to the real estate cycle and unanticipated inflation.
Historically, US dollar denominated investments have represented significant currency stability for Mexican investors. Preventing peso volatility through investing in US dollar denominated assets has proven to be a prudent investment strategy for Mexican investors to hedge exchange rate risks.
The peso-to-dollar exchange in 2008 reached a high of 15 to 1, and in October 2009 it was at about 13 to 1 with minimal fluctuations occurring on a daily basis. The current economic crisis in the U.S. has put most of the pressure on the peso, since Mexico exports about one-third of its GDP, with much of those exports going to the United States.
Safety Relative to Global Alternatives
Due to established legal frameworks and transparent markets, US assets have an inherent degree of safety in general compared to other countries particularly those with civil or political unrest. Global economic instability coupled with historically low, long-term interest rates offers foreign real estate buyers currently an opportunity that only presents itself roughly once every 20 to 30 years. When the dollar remains low for a sustained enough period, foreign investors can capitalize on the opportunity created by that sustained downtrend.
Foreigner Tax Advantages
United States tax laws are very favorable to foreign investors; providing at times for the payment of tax free interest by U.S. taxpayers to foreign investors. Capital gains from investment may be tax free or subject to lower tax rates, and the US tax system provides for numerous methods of tax deduction, credit, or deferral that may not be available investing in other global markets.
Foreign Investor Market Share
Despite multifamily’s domestic recognition as one of the safest real estate asset types, foreign investment is disproportionately lower in multifamily apartments relative to other asset types. The availability of government financing in the marketplace today allows investors to apply leverage to their assets which may not be available in investments in their native country. Foreign investors looking at multifamily as a diversification benefit to their portfolio are in a particularly strong position to take advantage of this burgeoning asset class and demonstrate superior risk-adjusted returns relative to their foreign peers.