This is a follow up to my blog post of a couple of days ago.
The most recent news and opinions regarding Multi-Family Apartment units has been that “cap rates” have been going down. I also believe that those same metrics work for smaller properties. As I’ve pointed out several times before, rents have been and are going up if you’ve got a property in good condition with amenities.
Just about every Duplex or Four-Plex I’ve been involved in has had multiple offers which is an indication of a pent up Investor demand. Our Property Management unit reports an overall vacancy rate of our portfolio is under 5%.
If that’s not the definition of a Seller’s market and a Landlord’s market then let me know when there is one.
Well lo and behold, Ben van der Meer a real estate staff writer for the Sacramento Business Journal posted the following article earlier today.
There’s a lot of money looking for Residential Investment Real Estate
I got this article from a Multifamily Executive, an online trade magazine I subscribe to.
The article among other things discusses the “capitalization rate” of some investment properties in various parts of the country and how the old rules of thumb in evaluating a deal don’t seem to be relevant in today’s market.
Now while the author of the piece is discussing large multi-million dollar deals…. the metrics he’s talking about apply to Residential Investment Real Estate on the smaller scale as well.
I’m seeing multiple offers on Duplexes and Four-plexes here in the Sacramento Region that are beginning to remind me of the market about 10 years ago. An example I’ll cite here is a Duplex we just closed escrow on located at 10206-10208 South White Rock Rd., Rancho Cordova. We listed it at $259,000 with a Cap Rate at just a shade over 6%.
With multiple offers coming at this one, the price ultimately wound up at $273,000 and the Buyer, in addition to that, accepting about $4,000 in “deferred” maintenance regarding some dry rot issues on the exterior.
If that result is not the definition of a Seller’s market I don’t know what is. Just thought I’d pass on the good news if you’re thinking of Selling.
This is the 3rd Duplex I’ve placed on the market within the last 30 days. One of the threads that has been consistent in these situations is that these Duplexes all had a decent enough income to give a cash and had Pride of Ownership to go with it.
I’m working with more than one buyer using “all cash” for their purchase. And they vary… Some are “flippers”, residential income investors and home owner purchases.
Personally… I don’t see an advantage anymore in doing a cash deal unless the property is in dis-repair and unable to be financed under normal circumstances. This was the situation in a couple of “bank owned” duplexes buyer purchased through us recently.
Also… having extra cash might help close a deal if an appraisal in conjunction with financing comes in low because the buyer can make up the difference if the value is there. This is a problem now because values are rising faster then the supporting appraisals.
Make it a Great Day…!
Ed Favinger, Broker, CRS, GRI, SFR, CDPE 916-203-1260 firstname.lastname@example.org