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INCOME PROPERTY MARKET LETTER
In our last letter on the apartment market in the Coachella Valley we noted two trends that continue today:
1) The price per unit of apartment properties has reached historic highs. While three years ago most buildings were selling in the broad range of $45,000 to $100,000 per unit, today the range has increased to $80,000 to $200,000 per unit and higher. 2) The inventory of available properties continues to be at near-historic lows. Over the past year or two, owners of income units have experienced declining vacancy rates, increased rents, and dramatic appreciation. With all that good news, their impulse has been to hold onto their properties, or, to test the market, list them for sale at very optimistic asking prices.
Over the past year two additional trends have become more and more important: 1) Buyers of income units in the Valley mostly come from coastal metropolitan areas (Los Angeles, San Diego, San Francisco) where our inflated local prices are still bargains relative to income property in their home cities. 2) Most buyers are in 1031 tax-deferred exchanges, and so can afford to make the high down payments (between 40 and 55% of sales price) which commercial lenders require in our market.
Where is this dynamic market headed? As a major brokerage firm of apartment properties, we feel we are well-placed to make an educated response to this question. In our view the existing imbalance between rents and sales prices (rents are incredibly low relative to price-per-unit) will put a damper on future appreciation of the kind we’ve seen over the past two years. If a unit rents for $800, for example, where is the upside in paying $150,000 to $200,000 for it? These and other considerations lead us to the conclusion that NOW is a very good time for an income property owner to consider putting it up for sale. If you are interested in a detailed assessment of the market value of your property, we ask you to contact us. We feel it is especially important now for owners to work with a highly experienced apartments broker. The present market is complicated, and requires an agent who has years of dedicated experience – not one of the hundreds of new agents who are getting into the real estate field. So if you’re looking for an agent (and wading through the dozens of solicitation letters you receive), we suggest asking the following questions of a prospective agent: How many apartment units has your firm sold over the past year? (Our answer: More than 120!)
How many apartment units does your firm manage as a rental agent (Our answer: More than 400 – we know the rental market on a first-hand basis!).
How long has your firm been in the business of listing and managing income property? (Our answer: More than 18 years!)
We hope the answers you receive to the above questions will encourage you to call us for a no-cost, no-obligation discussion of your property’s value. Maryellen Hill or Lee Drummond - 760-320-5033 |
