I think I can speak for most of us as real estate investors, the weekly reporting of jobless claims is causing a dark, burdensome lump to form in the pit of the stomach.
The number has basically tripled for weeks in a row, topping 17 million, up from 6.6 the Thursday prior, up from 2 the week before that.
This is nerve racking for any of us who rely on rent payments to cover the mortgage, but why do I feel so optimistic about this new strategy??
New construction may possibly be the one golden goose of the economy at the moment**. Why?
Well, let me address the asterisk first. There is an enormous amount of new construction underway currently. Most of what is being built is class A apartments and townhomes. That has been the craze during the last 5-8 years of our economy, as people were making more and more money and many could afford to live in really nice places.
We are not proposing that. Our idea is to build affordably priced housing, targeting the “middle market”.
The forgotten middle market is what we are defining as individuals or families making between 61-115% of the Area Median Income. It is a surprisingly low amount of annual income, but not low enough to qualify for government assistance. They are effectively being forgotten by the housing market, and subsequently many of these earners cannot afford quality housing anywhere near their place of work.
Our depart from the norm in construction is specifically addressing these earners with housing built to be affordable.
We are able to build for less, therefore we do not have to charge as much for rent. Charging less for rent means that a wider tenant base will be willing and able to afford to occupy our communities. With higher occupancy, we hedge against market gyrations while providing higher equity multiples for our investors.
People are losing jobs, but everyone needs a place to live. The first thing that happens during economic contraction is that people downsize. Storage does well during recession, so do mobile home/lowest income housing, but what happens to all of the middle market?? This is the answer and this is the new Golden Goose of this economy we are entering.
John is the owner of Bugay Investments Group. He loves Real Estate Investing and wants to share his thoughts and knowledge with you!