Apartment Investor’s Advisor — Winter Issue 2023
San Rafael — This year Marin landlords are finding out that the 6% rise in rents last year has come to a halt and rents are currently softening in many cities. Last year’s rise was a result of the removal of Covid 19 rental increase restrictions which caused owners to make up lost income by raising rents.
In the first quarter of 2023 local apartment owners are now faced with higher than expected vacancies, currently up to 4.2% county wide, and fewer applicants willing to pay last year’s prices. One owner told me that she had two vacancies in a six unit property in San Anselmo and had to drop the asking rent from $1950 to $1800 to get the units filled.
My survey of rents in Marin cities finds that Southern Marin rents in Sausalito, Tiburon, Mill Valley and Greenbrae are still strong. Typical one-bedroom rents can be below $2,000 in the older two-star buildings constructed in the 1960’s. But once those units have been renovated landlords can get up to $3,500-4,000 per month for a renovated apartment in a building with amenities-water views, walk to town, in unit laundry, fireplace and off street or covered parking.
In central Marin cities that include San Rafael, San Anselmo and Fairfax, renters are not necessarily commuters to jobs in the East Bay or San Francisco and more often are employed locally. Affordable work force housing is always an issue in these cities and when rents get high these renters start looking for cheaper housing. One bedroom rents start at $1,875 in San Rafael and can go up to $3,950 for a turnkey apartment close to downtown. San Rafael two bedroom rents range from $2,595-$3,695 in the first quarter of this year.
Landlords that own in Central Marin are telling me that rental applicants are now making offers to rent below asking prices and are willing to move on in their search if they don’t get the price they can afford. Owners will need to be flexible in their pricing this year and check the competition on apartment rental sites before setting a price on their vacant rentals. Apartment rents go hand in hand with the economy, and with the uncertainties of whether or not we are heading into a recession landlords need only be concerned about keeping their rental properties full.
Editor’s Letter
With the softening of rental prices in Marin, this year might be a good time for you to sell. If you would like a no cost evaluation of your property, give me a call at 415-302-7730.
If you are planning on selling or exchanging this year, make an effort to raise rents to increase your valuation and do all the presale items required for a smooth sales process- items to complete with the help of your agent:
- Order a sewer lateral report and get an estimate for the work. Best case scenario for you as the seller is complete the work prior to the sale and you will get the best price for your property.
- Order both a pest and contractor’s report prior to sale so you know where the deferred maintenance items may be. Complete at least some repairs to decks, interior living spaces and water heaters. The cleaner the property the higher the price.
- If you are selling an apartment property-2 or more units-it is best to have at least one unit vacant and staged in order to give a positive first impression to the buyers.
- Note: many of today’s buyers are first time investors and they are looking for turnkey properties. Other, more seasoned investors will want a property that needs updating and rental upside. Any deferred maintenance issues can be negotiated from the price.
Contact me if you are thinking of selling and I can give you a thorough market analysis of your property, make suggestions for any improvements prior to the sale and guide you through the sales process. I can be reached at 415-302-7730 or email me at katherine@khiggins.com.
Marin County Apartment Market Trends for Year End 2023
Marin County apartment sales of 5 or more units increased 35% over sales in 2021, with many more institutional sales of luxury complexes than past years.
In February of 2022, the 455 unit Larkspur complex known as Skylark in the hills above Magnolia Avenue, changed hands for $300,000,000 or $659,000 per unit. In San Rafael, a 126 unit newer complex in downtown known as The Lofts at Albert Park, sold for $58,600,000 at a price per square foot of $448.00. Additionally, in San Rafael, a 93 unit complex at 101 Nova Albion Way, turned over at a price of $30,000,000 and was part of a bulk bankruptcy sale.
The average price per unit for all 5 or more units apartment sales was $371,000, just $5,000 less than the price per unit of sales in 2021. Cap rates for both 2021 and 2022 were almost identical at 4.29%.
Retiring landlords and their heirs and institutional investors turning apartment properties for profit were the majority of Marin County apartment sellers in 2021-2022.
