January Recap for East Bay Multi-Units

New listing for a classic Victorian, recently updated!
In contract at Full Price!
Click Here: New Listing This is a triplex with over $8K per month in rent! CAP rate is 7.5 and Gross Rent Multiplier of 8.9!
To see information on my recent listings /sales and previous newsletters, please click East Bay Apartment Advisors
2023 Recap:
Interest rates definitely effected transaction volume and sales prices. I closed 5 deals this past Fall. In all transitions, the selling prices were full price, and good returns for the sellers. The year overall, was much more positive buyer than we all thought. At this time, buyers are now well understanding values based on their rents, location, and conditions. Also, sellers can see that the current interest rates and not going to get higher. This makes forward financial estimates of valuations easier for buyers and sellers to project.
Buyers are accepting that the current interest rates will go down this year, and many are looking long term, and planning to re-fi in the 5-7 year window. We are getting a sense that buyers are getting more comfortable with the current economic environment. Sellers are still getting strong offers for properties that are in good locations, and properties with stable rents and no deferred maintenance issues. Here is a reminder of the economic report from William Frey of the Brookings Institution. He is an expert on economic trends. He predicts that college educated professionals will start coming back, as will foreign professionals, and they will continue to re-locate to markets like Los Angeles and the Bay Area.
“I don’t think we should see California as being a long-term population loser. Immigration will come back”, William Frey, Senior Fellow with Brookings Institute.
Outlook for East Bay Rents
Rents have stabilized. They are not yet to the highest levels, but slowly ascending. Recent economic report from Apartment Lists shows that rents are down 7% versus last year in Oakland/Berkeley. We have rented 2 units, one in each of our different building at full price, so it appears to be determined by the location and amenities. Hopefully, we will see a slow, steady growth of rents as more companies set their back to work/hybrid work rules.
As far as the news reports that many buyers now priced out of the market due to rising interest rates, will now become renters, we will have to wait on that. It may deter current renters who were thinking about buying. This would lower the overall vacancy rate. 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.
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.
I did a presentation on increasing your rental revenue at the East Bay Rental Housing Association in January. 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 to a great start of 2024!