Why rental property?
Investing in and owning real estate is a proven and successful investment strategy. It has no connection to the stock market because tenants need accommodation even in a recession. Rental properties have lower risk than other property types such as condominiums, office or retail properties. In addition, cash flow stable.
If the rental market
The rent is set in local negotiations between public housing and the local tenants’ association. This pricing is based on underlying costs, which means that rising costs offset by rising rents and vice versa. This creates a stable small in revenue for property owners when such as rising operating costs or interest rates normally followed by rising rents. This rulemaking is unique for residential rental property.
Swedark Green Home
There are several advantages to investing in the Swedark Green Home:
Direct investment in residential property to a limited capital investment;
Economies of scale, where the investors share the costs of operation of the properties; and
Simplicity, where the investor does not need to self-manage the properties.
Risks & Solutions
Vacancies – handled by choosing properties in growth areas with little risk of migration.
Increased operating costs – offset by increased rents.
High interest rates – affect returns due to rising costs. For rental housing, however use-value rent, allowing cost recovery through subsequent rent increase. Short-term interest rate changes can be monitored with interest rate hedging instruments.
The diagram below illustrates the historical trend when investing in different types of opportunities and the level of risk the Swedish Property Fund’s focus is in comparison to other types of investments.
Development of one hundred thousand houses during the 1983-2012 period when investing in different asset classes
Return / Risk
Return / risk during the period 1984-2012 when investing in different asset classes
Source. Swedish Housing Fund