A Reliable Industry
The housing rental industry is one of the oldest and most stable markets to date. With minimal fluctuation, we believe real estate is an excellent source for building income over time. ROI of the real estate market is not typically correlated with stock market performance, and therefore is an attractive alternative for reliable retirement income.
Gordian strategically invests in both single family homes and select small multi-unit apartment complexes.
Our driving factors for investing:
Rental market demand in these household types continue to out-strip supply
Rent prices have continued to steadily appreciate over time
Buying is challenging for prospective homeowners because of general pricing and mortgage loan requirements; the renting population is rising
High spreads between bank rates and rental rates
As inflation ticks higher, so do rental rates. Locking in the lowest fixed rates now, while receiving appreciating rent, is our key strategy
Vacancy rates have remained low and controlled in these housing unit markets
Regional target markets have proven they have room for recovery from the market crashes over time
Collections predictability has remained stable for markets around the world
The Stats
Over the last 20+ years, the statistics for the real estate industry have been promising for investors. There are 3 areas of focus that are statistically relevant in driving our success.
1) Low vacancy rates
2) Rent prices are increasing
3) Single family homes and multi-unit apartment complexes are desirable sub-segments of the real estate market
The following information and graphs are cited from the Joint Center for Housing Studies of Harvard University’s “America’s Rental Housing 2020” report.
Vacancy rates
Gordian is proud to report an average turnover rate of 3.5+ years. Many renters are staying in the same rental units for longer periods of time. “Between 2008 and 2018, the share of renters that had lived in their units for at least two years increased from 36 percent to 41 percent among those under age 35, and from 62 percent to 68 percent among those aged 35–64. Similarly, the National Apartment Association reported a turnover rate of just 46.8 percent in 2018— the lowest rate of move-outs since the survey began in 2000.”
Rental Prices
Rent gains are continuing to outrun inflation, bolstered by low vacancy rates. “The Consumer Price Index for rent of primary residence was up 3.7 percent year over year in the third quarter of 2019, far outpacing the 1.1 percent increase in prices for all non-housing items. This brought the number of consecutive quarters of real rent growth to 29, the second-longest streak in records dating back to the 1940s. Indeed, real rents rose 27 percent over this seven-year period—four times faster than the prices of all other goods.”
Single Family & Apartment Unit Growth
Demographic trends – specifically the rise of Millennials and GenZ populations – will keep high levels of rental demand for the next decade. “The rising cost of entry into the homeowner market is also likely to price out increasing numbers of would-be buyers, thus giving another lift to overall demand and sustaining the growth in renting among households with relatively high incomes.”
“Over the preceding decade, the composition of the rental stock underwent a profound shift toward two structure types—large multifamily buildings and single-family homes. While the overall supply increased by 13 percent in 2008–2018, the number of units in buildings with 20 or more apartments alone jumped 31 percent and the number of single-family rentals rose 18 percent. Together, these types of rentals accounted for 87 percent of the growth in the nation’s rental stock over the period.”
“Rents for single-family homes also continued to climb. CoreLogic reports a 3 percent year-over-year increase as of September 2019, in line with the 3 percent annual gain recorded a year earlier. The consistent pace of single-family rent growth is noteworthy given the large fluctuations in the single-family rental stock over this period.”