Rents Up Again In August Boost Multi-Family Valuations
Inflation for August remains hot, with the core rate running at an 8.3% annual rate. The shelter index increased 0.7% month-over-month, led by a 0.7% increase in the index for owner’s equivalent rent of residences, and was up 6.2% year-over-year. The shelter index accounted for about 40% of the total increase in core CPI. A resilient labor market in cities that are benefiting from strong migration per the remote workforce phenomenon, new business formation and corporate relocation are, in my opinion, some of the main drivers of increasing rental rates.
I believe another main driver of increasing rents, and at the same time a dilemma for the Fed, is that mortgage rates have now doubled to 6.3% for 30-year fixed loans and have made new home purchases unaffordable to some, and possibly out of reach for not only first-time buyers but also those having to relocate for work or other reasons. And move-up buyers that are currently in a 2%-3% fixed-rate mortgage may be reluctant to make a new purchase. What’s bearish for home ownership can be bullish for multi-family assets and income.
One alternative for all three scenarios is to rent in a market where the shift away from home purchases to apartment rentals is bolstering the multi-family residential market and providing a secular tailwind. I think this is especially true in the hottest labor markets and most desirable cities where home prices soared, and thereby putting home purchases on hold for many until both home prices and mortgage rates come down.
Take for instance Sarasota, Florida, where Belpointe PREP, LLC (NYSE American: “OZ”) is actively breaking ground on a project within an opportunity zone area. Once considered a playground for retirees, according to U.S. News and World Report Sarasota now holds the #9 ranking as the best place to live and #1 place to retire in Florida as droves of young professionals and new businesses are moving there.
Consider the rapid 20% rate of population growth in Nashville over the past seven years. According to the Wall Street Journal, next to Austin, Nashville is the second hottest job market in the U.S. Here, too, Belpointe PREP (NYSE American: “OZ”) has acquired acreage for just under $21 million to commence a redevelopment project to build out an approximately 412-apartment home community consisting of two 7-story buildings. Belpointe PREP currently anticipates that the buildings will have a fitness center, game room, co-working spaces outdoor, heated, saltwater swimming pool, riverfront courtyards and rooftop terraces.
Rent growth is also staying hot in those markets that Belpointe PREP is currently targeting for stabilized acquisitions with a focus on generating free cash flow. Raleigh, Durham, and Charlotte, NC, Nashville, TN, and St. Petersburg, FL, are seeing employment levels top pre-pandemic levels, which in turn is driving demand for full-featured Class-A apartments resulting in a steady rise in rental rates.
Qualified Opportunity Zones have been designated in all 50 states, the District of Columbia, and 5 U.S. territories. While many Qualified Opportunity Zone Funds (QOFs) are invested in a single property. Belpointe PREP (NYSE American: “OZ”) is striving to build out a diversified QOF, but with a high-level focus on multi-family housing projects in those markets where the migration of young workers and families are in a secular uptrend.
With literally hundreds of QOFs to choose from, Belpointe PREP, LLC (NYSE American: “OZ”), the only publicly traded QOF where, if you purchase units in the market, there is no minimum investment. Because “OZ” is a listed company, transparency is considerably higher than that of privately managed QOFs. In addition, while most other QOFs have limited or restrictive redemption features, OZ unitholders can buy and sell Class A units in the open market with no required documentation.
One more key item of huge importance is unitsholders of OZ are not at risk of receiving and being liable for any future capital calls. Belpointe PREP absorbs all the risk of costs that exceed forecasted budgets for renovation and new builds. Capital calls are an unfortunate feature many investors may regularly face in acquiring, developing and renovating private opportunity zone properties. Belpointe PREP’s structure insulates its unitholders from bearing the risk of future unforeseen project costs.
Investing into a QOF, like Belpointe PREP (NYSE American: “OZ”), allows an investor to defer the tax payment on invested capital gains through tax year-end December 31, 2026. Plus, all income and appreciation from the time one invests into a QOF through December 31, 2047, is potentially tax-free. We spell out how this alternative can work for you in our updated white paper. Follow this link here to request the White Paper.
Have questions about how Belpointe PREP (NYSE American: “OZ”) can provide opportunities for investment appreciation and income and help you or your clients to defer or eliminate capital gains tax obligations?
Call or email us and we’ll take the time to answer all of your questions about Belpointe PREP (NYSE American: “OZ”) and how reinvesting capital gains in a QOF can be utilized to offset an investor’s tax obligation.
You can contact us at 203-883-1944 or IR@belpointeoz.com.
Cody H. Laidlaw
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
Disclosure: Cody H. Laidlaw is the Chief Investor Relations Officer. Cody is also an investment advisor representative with Seaside Advisory Services, Inc. (d/b/a Seaside Financial & Insurance Services), a SEC registered investment adviser offering advisory accounts and services, and holds a long position in Belpointe PREP, LLC’s Class A units.
Important Information and Qualifications
Belpointe PREP, LLC (“Belpointe PREP”) has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for the offer and sale of up to $750,000,000 of Class A units representing limited liability interests in Belpointe PREP. You should read Belpointe PREP’s most recent prospectus and the other documents that it has filed with the SEC for more complete information about Belpointe PREP and the offering
Investing in Belpointe PREP’s Class A units involves a high degree of risk, including a complete loss of investment. Prior to making an investment decision, you should carefully consider Belpointe PREP’s investment objectives and strategy, risk factors, fees and expenses and any tax consequences that may results from an investment in Belpointe PREP’s Class A units. To view Belpointe PREP’s most recent prospectus containing this and other important information visit sec.gov or belpointeoz.com. Alternatively, you may request Belpointe PREP send you the prospectus by calling (203) 883-1944 or emailing email@example.com. Read the prospectus in its entirety before making an investment decision.
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