The price of gasoline impacts every part of our lives from the food we eat to the cars we drive and our selection of a place to live. Include real estate investing in this grouping.
In my self-imposed naivete I believe oil prices should be $35-75 per barrel. What keeps prices above these levels are things un-related to actual oil production; like presumed un-rest, the 24-hour news cycle, three guys in Luxembourg hoarding contracts in an attempt to keep pressure on supply (when supply is excessive).
I remember Christmas 2008. This is a few short months after Lehman failed and the Troubled Asset Recovery Program (TARP- how many acronyms does it take to spend a billion dollars?) was all the rage in Washington DC.
Momentarily, the national average for a gallon of gasoline was $1.72 a gallon. It was an economic “dark hour’ and oil was $40 a barrel.
When fixed costs rise, people “circle the wagons”
Food, fuel, shelter are three unavoidable costs related to the “carbon footprint” of our existence. Sometimes “food inflation” is attributed exclusively to the costs of transport.
Increases in food, fuel or shelter means having to cut back in some other area. The most volatile of these expenditures is fuel. When fuel rises, renters look for ways to decrease their housing expenditures.
Here is the trade off: rent a newer/bigger place for less money further away from my job and pay the difference in fuel consumption or live closer to my job in a smaller place, for more money, and pay less for fuel consumption. What most renters fail to realize is that rent growth is more likely at the close-in location.
Multifamily owners in tertiary markets become imperiled as individuals and family’s previously willing to live the rural life and take on the commute can no longer justify this lifestyle as fuel prices increase.
Properties closer to job centers thrive, properties further from job centers suffer. Since oil prices are somewhat “sticky” on the way down, once this trend begins it reverses ever so slowly.
From a European perspective we American’s are wimps when it comes to our low tolerance for pain at the pump. Consider fuel today in London and Paris is approaching $10 U.S. per gallon. Consider also, that both of these cities have tremendous infrastructure in mass transit.
For “people transport” in many major U.S. cities we continue to utilize older “technology” called roads rather than a spoke and hub train system.
When reviewing potential acquisition candidates always consider proximity to jobs and rapid transit. Also check on the municipalities budget to maintain existing rapid transit systems. You don’t want to be the last one to know that bus service that is now in front of your development is soon to be re-routed with the next closest stop a mile away.
Multifamily Insight Volume 1 delivers hard hitting facts about how to buy and operate multifamily apartment assets. Multifamily Insight Volume 1 teaches its readers how to apply techniques to increase revenue and control expenses in today’s volatile market. It is a reference guide delivering educational content about how to implement real world strategies in professional property management and execute multifamily operations at their highest level of efficiency
About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.com