Why Home Ownership Doesn’t Work

For starters, it's no longer the most efficient form of housing in the information age. (Who wants to waste their time painting picket fences anymore?)

Multifamily has been living in the shadows of the single-family housing bust, according to Atlanta-based Cortland Partners CIO Mike Altman (right, with chief acquisitions officer Brad Brown and CEO Steven DeFrancis), but there has been a fundamental shift towards renting around the country. The main driver: Student debt, he says. The average college student in 2013 graduates with $29,000 of debt, versus $25,000 in '08, putting a major constraint on personal economics. (But that bachelor's degree in Nomadic philosophy is totally worth it.) And not being able to save for a down payment as quickly means a few more years in the rental pool—a huge factor in chewing through all the new supply, Mike tells us. (He's hoping to squeeze in a ski trip over the holidays.)

Blackstone's $2.7B buy of GE apartments this year (global head of real estate Jonathan Gray, above) was huge for the sector, which has never seen that type of capital inflow, Mike says. (They're gonna need a bigger safe.) Big capital buying up stabilized portfolios and companies will be a major theme in 2014, he tells us. For Cortland, a value-add investor with 19,000 units in the Southern US, the goal would be to renovate distressed assets and feed that appetite. He calls Cortland's "heavy value-add" a competitive advantage. They invest about $13,000/unit in renovations versus the typical $5,000 to $7,000, meaning their units look that much newer down the road. Cortland's renovating 500 units/month (it acquired 9,000 units this year) and hopes for similar acquisition numbers in 2014.