2018 Real Estate
A 2018 is winding down. We had a great year selling multifamily properties. 1031 exchange money was coming in looking for apartments in Reno so prices have been increasing. Rents also have been going up and that trend is now slowing down a little. Approximately 10,000 apartment units are being built or in final permit stage. Due to land costs, construction costs, city and county fees, the rents on the newer product are high targeting the “luxury” market.
The MLS shows 39 sales in the last quarter, but several big sales did not go through the MLS, these being larger complexes. The average sold price per square foot is $195.82. All this is good news and bodes well for our local market.
Is it time to buy or sell? Sales prices of apartments have been rising. What they will do in the future is hard to predict. We do not have to go far to see markets that are declining. In some parts of California an uncertain political climate has caused a decline in value. In Seattle, a number of factors have caused prices of residential properties to decline and inventory of unsold homes as well as small multifamily units to rise. These are our feeder markets and they certainly affect our market because the 1031 exchange money we so love may slow down. And yet, demand in our market is outstripping supply for rental housing, especially on the lower end of the scale. With prices going up, even though there are increases in rent, it is becoming harder to justify a purchase on cash flow. My contention is the only financial reason to have rental property is cash flow. So is it time to buy or sell? This is not a simple question because there are so many variables that the owner brings into the equation! Tax consequences of a sale are important to consider, and if you would like to do a 1031 exchange, what do you buy? Creative solutions like carrying back paper may help some and be a burden to others. A shift out of management into a more passive role is a motivation to sell we see frequently.
So is it time to buy or sell? As many of you have heard me say while looking you in the eye, “I don’t know... tell me your story.”. If you would like us to review your situation please set an appointment. We can value your property and show you alternative investments that may better fit your needs. Cash flow is king! Your rents may be below market and expenses high, we would love to help you maximize your cash flow and value, so we may help you in the future with a sale. We do apartments, give us a call at (775) 762-5418.