The small apartment building (8 to 20 units) market in Long Beach, CA, which serves the lower middle-income rental market, continues to offer outstanding investment opportunities at the present time.
With the gentrification going on in downtown Long Beach, the rental market should be even stronger in a few years, with increasingly higher quality tenants and higher rents. In addition, the median income of downtown Long Beach residents has increased 57% in the last 10 years.
Given the current historically low interest rates at which JMS has been been financing its properties recently, several investors have asked how an increase in rates will affect their returns.
While there is no question that a move upward in interest rates negatively affects fixed income investments such as bonds, rental real estate properties have the ability to increase rents thus making them not truly “fixed income”.
In addition, with the US Federal Reserve in total control of US interest rates, both short term and long term, rates will only be allowed to rise if the Fed believes the US economy is growing at an acceptable level and also that inflation is becoming a threat. Historically, owning hard assets such as real estate in an expanding economy with inflation has been a winning strategy.
However, JMS believes that our strategy of buying lower quality properties, intensively managing them to maximize value, and then selling or refinancing them to unlock the value, provides additional protection against interest rate increases. We are not “trading dollars” (i.e. buying high quality assets requiring minimal management but offering very little opportunity for quality improvement or rent increases above inflation). Instead, we believe the old real estate adage that you make your money when you buy, not when you sell. This protects investors against interest rate moves.
The multi-family market has fared better than almost any other real estate sector in the last year, and this pattern is expected to hold form in 2013. Low interest rates, an easing of financing restrictions and limited inventory have paved the way for new investors to enter the market.
For many people, homeownership is no longer viable after the recession, because many who experienced a foreclosure or short sale want no part of re-entering the single-family market. And, ironically, it is these people who make for the best renters. They have a completely different mentality, and require less maintenance.
As one of the most populous cities in California, Downtown Long Beach is the site for nearly all of the city’s major tourist attractions and municipal services. In addition to the 5.5 million people who visit our Downtown annually, over 4 million square feet of office space and 13,500 Downtown residential units—a mix of both luxury condominiums, workforce housing, and everything in between—contribute to the density important to sustaining a lively and thriving business district.
This is a Downtown that has reinvented itself over the years to become one of the top turnaround downtowns in America. It has received some notable awards, including being named one of the Top 10 Best Social media cities in America and the most bicycle friendly city in the US, which illustrates the proactive and innovative methods that the City and its community partners have taken to connect with citizens and businesses.
Long Beach is consistently ranked as one of the most walkable large cities in the United States, with 94% on walkscore.com and 8th most walkable city in the US by Good Magazine, further demonstrating our City is one of the best destinations in which to live, work, and play. Public-transit in the area is fantastic with the blue line going to LA and extensive bus lines around the city. It’s proximity to the 405,710,605, and 22 Freeways gives it easy access to surrounding communities.
Long Beach is still one of the last remaining seaport cities, where residents can live on ocean frontage, which is rare in both Los Angeles and Orange County. Like Orange County, downtown Long Beach is a very appealing place to live, work and play. It offers an urban lifestyle experience different than what you find in O.C. — and it’s convenient to people who work from Los Angeles to O.C.
For more information, please click the below link to the Downtown Long Beach Business Association’s Economic Profile.
http://www.downtownlongbeach.org/uploads/2012-Downtown-Economic-Profile_LoRes-o_hDYWCf.pdf
