But there is one investment that continues to yield a solidreturn despite the ailing economy--multifamily rental housing. Thereason is the downside protection offered by a steady flow ofrental income. No matter how bad the economy gets, people stillneed a roof over their heads, and rent will come ahead of carpayments, credit card debt and other financial obligations.

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Indeed, the more people who are forced out of their homes byforeclosures, unable to buy a home due to tight credit or unwillingto buy a home due to uncertainty about the future of the for-salehousing market, the greater the demand for rental housing.Moreover, the New York/New Jersey metro area's dense populationcontinues to fuel demand, and that population has some of thehighest household incomes in the nation.

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Because of this demand, we continue to see a large number ofapartment house deals, and we see no prospect of the demandabating. Although credit remains tight, interest rates are at anhistoric low for borrowers with good credit, enhancing theirability to purchase such properties.

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In 2007, for instance, multifamily investments yielded anaverage annual return of 16%, compared to 11% for Standard &Poor's 500 Index and 13.7% for the NASDAQ Stock Market, accordingto a study by the National Association of Real Estate InvestmentTrusts. And that was well before the stock market took its recentnosedive as a result of the credit crunch.

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Multifamily also holds more appeal than other types ofcommercial real estate investments because of the downsideprotection. As some owners point out, if they lose a tenant or twothey lose a few hundred dollars a month, as opposed to aninvestment in industrial or other commercial real estate in whichthe loss of a single large tenant can result in large financiallosses.

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A recent survey of more than 400 top executives in commercialreal estate conducted by the law firm DLA Piper found that 50%ranked multifamily as the most attractive commercial real estateinvestment. In New Jersey, the rental market was recently describedin the New York Times as "vital" and "trending upward." Theoverall occupancy rate is 97% and rents are rising at an average of4% to 7% a year, depending on the analyst, the Timesreported. This demand is being fueled in part by bargain-seekingrenters emigrating from New York and Philadelphia, where rents areconsiderably higher.

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But investing in multifamily housing offers other advantagesbesides a solid return. In this economy, the most important may beits tangibility. In contrast to equities, whose value mayevaporate, leaving investors with little more than a piece of paperof virtually no worth (witness Lehman Brothers and WashingtonMutual), investors in multifamily housing have the security ofknowing that a deed represents a tangible asset in the form of thestructure and the land it rests upon.

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Indeed, investors in economically depressed parts of the countryare being drawn to the multifamily market by the fact that sellingprices represent a fraction of the value of replacing thebuildings. While that isn't the case in this metro area, wheredemand for multifamily properties continues to shore up prices,investors nonetheless have the reassurance of knowing that they areputting their money into bricks and mortar rather than anintangible asset such as a stock certificate.

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Another appeal of multifamily is that of control. Whileinvestors in equities have little control over an investment in thehands of professional managers, investors in multifamily have theability to affect the return on their investment. Indeed, some ofthe greatest investment opportunities lie with the acquisition ofdown-at-the-heels properties with good upside potential. As aresult of good management--and often, sweat equity--investors canimprove their properties, resulting in increased rents andvalue.

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The potential to thus improve the value of their investmentholds great appeal for investors. In fact, many investors now atthe helm of extensive real estate empires launched their careerswith the profit from the improvement of a small rental property,which they then reinvested in another property, repeating the cycleagain and again. Few other investments offer such an opportunity tobuild a legacy for future generations.

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Indeed, the hands-on appeal of multifamily housing is greaterthan ever, thanks to a 70-million-strong baby boom generation that,despite entering retirement age, may not be ready or able to fullyretire. Many members of this generation view owning and managing arental property as a means of keeping their feet in the workadayworld without the restrictions of a 9-to-5 job.

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While dealing with tenants does have its negatives, for manybaby boomers the opportunity to interact with people on aday-to-day basis, as opposed to merely sitting passively on a stockportfolio, or even worse, enduring a white-knuckle roller coasterride, is one of the most rewarding aspects of their investment.

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Although home real estate prices are down in parts of the NewYork metro area, they are still relatively high compared to therest of country, which might lead prospective investors to wonderif opportunities still exist in multifamily. The answer is aresounding yes. While class A properties--well-maintainedproperties with ample amenities in desirable neighborhoods--may notallow investors to make a killing, they still yield a solid return,and B or C class properties in less desirable areas can offerupside potential and higher returns.

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The population shift back to urban areas--being propelled byhigher gas prices, improved public transportation and a lack ofavailable land in outlying suburbs--offers opportunities for thosewilling to invest time, money and effort in multifamily. Many olderproperties with 10, 20 or 30 units still exist in cities and innersuburbs that, with TLC in the form of fresh paint, new windows,improved landscaping and kitchen and bathroom upgrades, can betransformed into stellar performers.

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We continue to close deals, and with the economy appearing as ifit will remain in the doldrums, a new class of potential renters isarising that should fuel the demand for rental housing for years tocome.

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Jeffrey P. Wiener is president and co-managing director ofthe Kislak Co. in Woodbridge, NJ. He can be reached [email protected]. The views expressed in this article are theauthor's own.

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