This week I checked in with Christine Sable of Sable Commercial Realty in Lancaster, a regular contributor to this column. I was curious about what she's seeing as hot trends this season in her world. Turns out the story of the season is that multifamily investment properties are hot, and the inventory is low.
It’s no secret that investors have been eyeing real estate with renewed vigor since the recession began. REITs are a buzzword in financial circles. We’ve certainly seen the land grab at the grassroots residential brokerage level with multiple offers on fixers and decent foreclosures.
But Christine clued me in over lunch at the new Noodles & Co. at Overlook that it’s really the bigger multifamily properties – 20 units and up – that are attracting real investor attention.
“The vacancy rate for larger multi-units properties is very low, 5 percent or less,” she noted, which makes them a very stable and desirable investment. Investors have resorted to soliciting owners directly to entice them to sell. “There is incredible demand now” for apartments in the local market, she added. Investors know this and are seeking to capitalize on it.
One concern that Christine has is that investors may not be sufficiently accounting for maintenance, and capital improvements in their rate-of-return calculations. Frequently, apartment-building owners under-report their true operating expenses when selling their property. A large number of apartment properties have deferred maintenance and upgrade issues that will likely come back to haunt new owners down the road.
“Despite that, decent quality multifamily listings are still flying off the shelf,” she notes. Most investors are looking for 20 to 50 units or bigger, but due to the lack of inventory, they are now considering as low as six to 10 units – others are looking to do 1031 exchanges in the transaction and will consider almost any multifamily building.
So, if you own a property with 10 units or more, you’ve got a hot commodity right now. Don’t be too surprised if the phone rings and an investor comes knocking …