By Alan Englander, Senior Vice President of Business Development
Anyone who knows me knows how much I love my job. Whether it’s playing golf or going to dinner or attending a baseball game with them, I get tremendous joy out of being with clients and prospective clients. My gift for gab is certainly no secret, and I take such pleasure in really getting to know investors, learning their life stories and sharing mine.
But as I much as I absolutely treasure these personal connections, what makes me truly passionate about my job is my strong belief in the value of multifamily investments for high net worth individuals.
There are, of course, numerous ways to invest in real estate. Investors can purchase rental homes or commercial properties and manage the assets themselves. However, being an active landlord can involve a significant amount of stress, as investors often find themselves jarred out of a deep sleep in the middle of the night by phone calls about broken pipes and leaking roofs.
Publicly traded REITs, real estate-specific ETFs and real estate-focused mutual funds have become popular investments over the years, but these vehicles can be subject to market volatility.
For high net worth individuals, investing in private real estate funds that purchase investment-grade properties such as large apartment communities, big retail centers or sizable office complexes is a sensible way to incorporate the benefits of real estate into their portfolios.
And private funds that focus on multifamily investments can prove especially appealing. Below are some of the reasons why.
However, direct real estate investments had a lower standard deviation, 11.37 percent vs. 19.59 percent for REITs, over the same period and a higher Sharpe ratio, 0.55 vs. 0.40 for REITs, meaning better risk-adjusted returns.
Overall, private real estate funds can provide the combination of consistent, steady returns and lower volatility than can allow investors like high net worth individuals to sleep more soundly at night. And they can especially sleep soundly when they invest in private funds, such as those sponsored by JVM, in which the general partner’s senior managers also invest significantly. This means the general partner is as motivated as the investors to ensure that a fund’s properties perform well and deliver consistent and strong returns.
People in the 20s and 30s don’t want to be anchored down by a home – they crave the flexibility to move that apartment living affords them, and they often don’t want to be burdened with the expense and labor that goes into maintaining a single-family home. Plus, they saw the financial hit their parents took when the home market crashed a decade ago. Additionally, baby boomers and senior citizens are growing increasingly enamored of downsizing and enjoying the ease and amenities of apartment living.
The Midwest, which is where JVM’s entire apartment portfolio is located, is especially well positioned, as intense competition in coastal real estate markets has limited growth potential in the country’s primary cities. Tenants in affordable Midwestern markets can more easily absorb rent increases than coastal residents, allowing investors to achieve higher returns through cash flow and appreciation
Meeting investors and potential investors is so much fun for me. Getting to know and talk with people across the country is immensely fulfilling and will always be a huge part of why I love this job. But helping people bring balance and stability to their investment portfolios is a big part of it, too.
Alan Englander is senior vice president of business development for JVM Realty Corp.