Category: Insights

Over the last decade, multifamily properties have been one of the most targeted investments for real estate developers and investors. Class A apartments, student housing, senior living, and built-to-rent have all been popular sub-asset classes within multifamily. While the type of property is important, location has always been one of the primary driving forces of a real estate investment’s success. Location trends shift over time, and Chicagoland 1031 Exchange has, for several years, been working with DST sponsors that tend to focus on more suburban locations. Before the pandemic, urban, city-center apartments were one of the most popular locations. A housing shortage brought on by the lack of development during the 2008 recession, the millennial generation’s desire for apartment living over home ownership, and the proximity to the highest paying jobs and vibrant nightlife all contributed to bullish investor sentiment toward urban housing. However, the pandemic changed a lot for urban living. With offices shutting down, living close to work was no longer a benefit. Restaurants and entertainment venues couldn’t operate so that perk also went away. Residents had to spend their time inside their homes or enjoying the outdoors. With urban areas typically offering low square footage and limited outdoor recreation activities, they were not a particularly desirable place to weather the pandemic. This began a shift to the suburbs. CBRE discusses this in their 2022 Real Estate Market Outlook: “As of Q3 2021, urban vacancy rates average 5%.... By contrast, suburban properties fared better… income uncertainty, a preference for outdoor options, a need for more space and more millennials with growing families requiring schools—drove demand for apartments in lower-density and lower-cost submarkets.”¹ The same CBRE article predicted a shift back to urban living, citing return-to-office policies as one of the main driving factors. Fast-forward to today closing in on Q2 2024, things look a little different. Return to office has not happened to nearly the extent and speed at which many thought it would. Additionally, economic factors such as rising interest rates and inflationary pressures have taken their toll on multifamily properties in all locations. These factors put an outsized downward pressure on urban properties, which pushes residents to the suburbs. A recent article published in Real Assets Advisor titled “The suburbs have become multifamily’s new land of opportunity” discusses this move to the suburbs as an investment opportunity. It refers to suburban multi-family as recession resistant and says, “if the economy is performing poorly, renters in the city will look to nearby suburban communities that offer the same perks for lower rents. Whether the economy is stronger or weaker, there will always be steady demand for well-located, high-quality multifamily product in suburban markets.” This sentiment is echoed by the Wall Street Journal citing a report from Apartment Listings which shows that suburban rent has grown 26% since 2020 which is 8% higher than the gain in urban centers.² While there are still opportunities in other types of areas as well, these reasons and more are influencing Chicagoland 1031 Exchange’s continued interest in properties with suburban locations. To learn more about how we analyze locations and conduct due diligence on investments for our clients, contact our advisors today.

1. CBRE 2022 Real Estate Market Outlook
2. Wall Street Journal

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As the ongoing COVID-19 pandemic, inflation concerns, and the war in Ukraine illustrate, it can be difficult to decide where and how to invest money in volatile environments. As we like to say, we don’t have a crystal ball to predict the future; instead, we focus on the bigger picture to help us identify opportunities. We believe that the multi-family sector – long a bedrock of our real estate investment strategies – deserves investors’ attention in 2022.  Read More

The fallout from a Black Swan event, like the COVID-19 pandemic, can manifest itself in counter-intuitive ways. The economic devastation seen throughout the world in 2020 is undeniable; yet, amidst the havoc, we also witnessed one of the biggest booms in housing prices in U.S. history. According to the Case-Shiller National Home Price Index, which tracks price changes of single-family homes, housing prices rose 9.5% from November 2019 to November 2020. How does this happen while we’re simultaneously dealing with the worst pandemic in 100 years?  Read More

Recently, the White House released the details of President Biden’s proposed $1.8 trillion American Families Plan. The President’s proposal outlines several tax increases intended to help finance parts of this monumental spending—including changes to 1031 exchanges that, if passed, will severely limit the ability of everyday Americans to complete an exchange.  Read More

$1.5 Trillion¹. That’s the amount of outstanding student debt being carried today in the U.S., and most of that burden rests on the shoulders of millennials. The impact this financial obligation has on their housing choices, including their ability to move from renter to homeowner, can’t be overstated.  Read More

The Delaware Statutory Trust, or DST, is a popular investment choice for real estate investors interested in deferring capital gains taxes on appreciated property by using a 1031 exchange. We created the eBook — Bringing Clarity to Your 1031 Exchange — to help potential investors better understand the benefits and risks associated with DSTs.  Read More

When tax reform passed Congress last year, 1031 exchanges pertaining to real estate were spared major changes in legislation. This often under-looked yet tax-advantaged solution is potentially one of the most powerful tax planning and wealth preservation strategies available to investors.  Read More

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Millennials make up the largest segment of renters and it isn’t just because they are the largest generation alive. It’s also because they are renting longer. There is no doubt that millennials are greatly impacting the current housing market. According to Zillow, the median age of today’s renter is 32 and the average income is less than $50,000. With high debt from student loans, it has become even more difficult for this generation to save for a down payment on their own home.  Read More

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Tenants in Common (TIC) and Delaware Statutory Trusts (DSTs) are both viable structures to implement multi-owner real estate offerings when completing a 1031 exchange. However, there are several key distinguishing characteristics.  Read More