August Update: East Bay Rents are Coming Back, and Reimbursement Check Received

August Highlights

We had a vacancy come up in mid-August for a small 2 bedroom in the Piedmont Ave area of Oakland. We were able to get the unit rented on the first open house and at an increase of 6% over the previous rent.

We are getting closer to, or almost at pre-Covid rents. Demand still depends on location and amenities, as renters can be more particular right now.

San Francisco is still below pre-Covid rents, due to some many people having the chance to work from anywhere. Rent numbers are still going up, albeit slowly.

On the good news front, a building owner had a tenant not paying any rent since last December. They just recently received a check from the Covid Relief program that covers all the past due rent and paid through September 2022.

Please click East Bay Apartment Advisors , for the updated website. Any feedback is greatly appreciated!

Below is a recap of allowable rent increase:

  1. Rent increases are allowed as of August 1, 2022.
  2. Oakland is 3% and Berkeley is 2.1%.

To compare, Santa Monica’s allowable rent increase is 6% and city of Los Angeles is 5%. City of LA includes Venice, Westwood, and Hollywood.

Regarding the allowable rent increases, we will only be raising rent in units that are well below market rent. With units that are at, or near market rent, we won’t be doing a rent increase as that may put them over market rent and encourage tenant turnover.

Current Sales Trends

Now that interest rate hikes have been in effect for a while, buyers are accepting these new rates and they are still pursuing multi-unit properties. We have all seen during Covid that the Bay Area is still a very good place to own multi-unit properties.

Overall, buildings are still getting very strong offers at valuations that are still very high.

Whether we use CAP rates, GRM (Gross Rent Multiplier), or price per unit, we are seeing very strong numbers that reflect that East Bay apartment buildings are continuing to be a very desirable asset.

Buyers are very motivated to purchase now, as the Federal reserve bank may be raising interest rates 1 more times this year.

Outlook for East Bay Rents

San Francisco metro area is getting closer to pre-Covid rents, but still not quite up to pre-Covid rents. The East Bay is seeing slow growth, and almost to, or at pre-Covid rent numbers.. Many economists are speculating that this issue is due to the large number of companies in the Bay Area that are allowing 100% remote work. We will see how this trend continues.

If you are having trouble getting a vacancy filled or have questions, please reach out.

Remember that it is better to do a “temporary rent reduction” rather than lowering the rent. This is true for existing tenants and new tenants.

Current Sales Market

If you are thinking about selling in the next 6-12 months, then starting the process now would be a good idea. The market is strong, as buyers are still paying prices based on income that is similar to Pre-Covid. The recent rise of interest rates is having some effect on pricing/values.

Then the issue that has come up is: How do I defer the capital gains taxes.

Two ways:

1) Delaware Statutory Trust. Click DST Tax Deferral,

2) Doing a 1031 tax deferred exchange.

With regards to doing an tax deferred exchange, I have spent some time searching in solid markets (Seattle, Austin, and Reno) for both commercial Triple Net (NNN) opportunities and multi-units that are all delivering at least a 5% CAP rate return.

Click: 1031 Exchange Opportunities

I did a presentation on increasing your rental revenue at the East Bay Rental Housing Association last year. Click Here: Maximizing the Return on your Investment for the highlights.

Please reach out if you are interested in getting more information on the DST option or 1031 exchange.

My most recent transaction, a duplex in Berkeley, went into contract at $50,000 over list price, very short closing and no issues. If priced right and marketed fully, sellers are getting very strong offers.

Current Market For Building Sales

For example, if you want to sell your apartment at this time, I can help you with an evaluation and guidance.

I have spoken to two of the top lenders for East Bay multi-units and they are working on, and closing transactions at this time. I can forward their contact info if you want to speak with them. Right now, If buyers have a good down payment they can get a loan and I can navigate you through the process.

It is always important to get guidance and advice from experienced multi-unit brokers who will market your property extensively to all potential buyers and brokers. Posting a new building on all websites and sending out emails blasts gives the property visibility to literally tens of thousands of potential qualified buyers.

Looking forward a strong year and a great 2022!

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