Residential single-family real estate is reeling. The sub-prime crisis has hit and it has hit hard. While experts tell us the recession is technically over, many homeowners still struggle to keep the largest single source of wealth they possess, their home, from dropping into the abyss. There is still a popular notion that all real estate is a bad investment when nothing could be farther from the truth. True, single family home values are still dropping slightly (but no longer at the annual rates we witnessed in 2008 to 2010), but investment properties are stable and among this investment class many apartment properties are holding their value and some are even continuing to appreciate.

For investment real estate there has not been the spectacular fallout that has impacted other investment types, but for retail & office properties it has been challenging. By and large, retail properties are still retaining tenants while working harder to attract new ones. Rents are flat or discounted and will stay that way for the foreseeable future. Absorption is slow. The slowing economy puts pressure on American’s pocket books, they buy less, and retailers struggle, but most will tough it out. According to the Small Business Times, for March, 2011, retail vacancies for the Milwaukee metro area were 11.2% in the 4th quarter of 2010. This places these markets a bit on the high side for unrented space, but not too bad compared to more volatile national markets.

Office vacancies are high in most markets as well. The Milwaukee, Ozaukee & Waukesha office market has a 21.4% vacancy down slightly from the 4th quarter of 2010 at 22.3%. These are big numbers for a market that should stabilize at 6-7%. The absorption is strong in the western suburbs, but flat or negative in the downtown markets.

The real stellar performer in the midst of this mess is apartments. As more people lose their homes they become renters. Others who can no longer qualify for a mortgage will stay in the rental market. Demand for quality, professionally managed apartments has gotten stronger & stronger. Throughout the Milwaukee metropolitan market, vacancy rates for apartment properties range from 2.6% to a high of 6.4%, great numbers even in a flourishing economy. Owners of apartments may not be able to increase their rents much for a year or two, and they may experience a slight increase in rent defaults, but they will pay their taxes, their mortgage and continue to build wealth even in the worst of times. Historically real estate outperforms the Dow over time in real returns.

Since most of us experience apartment life at some point in our lives, it’s easy to understand what it takes to make an apartment appealing to renters. Maybe more importantly, managing apartments is straightforward; not requiring special skills or education. They provide people with decent places to live, and over time, they can make their owners rich.

Call Kevin Gleason @ 414-870-5363 to answer any questions you may have about investing in real estate or to discuss our apartment listings.