The multi-unit market is still strong, with some cooling!
It’s been a unique time. With interest rising dramatically, so quickly, the single family home has really cooled. The market for multi-units is still strong as buyers have cash and are only earning .50% on their savings and CDs.
Buildings that are priced correctly are still getting a lot of interest and offers from motivated buyers. 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 the at 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 1-2 more times this year.
Outlook for East Bay Rents
We have had 3 vacancies in the last 60 days.
Getting these units rented varied drastically, based on the location. One vacancy ( No other apartment buildings in the neighborhood) was rented within 15 minutes with multiple applications/deposits)
The other 2 vacancies took almost a month and both were given temporary rent reduction (free parking for 6 months).
At this time in the East Bay rental market, demand and prices depend on location and amenities.
Overall, the San Francisco Bay Area area is the only metro in the top 30 that still has rents below pre-Covid rents.
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.
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 in 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!