How are rising interest rates affecting multi-unit property values?
As you know, The Fed just raised interest rates by .05% after a raise in March of .025. The most recent raise is the largest since 2000. This is being done with hopes of reducing 40-year high levels of inflation.
How does this affect you as an owner of multi-unit properties? Should you sell? Should you buy it? The inventory has increased but is still low, so there is a healthy demand for properties and lots of available exchange dollars available looking for uplegs.
CONSIDER CARRYING SOME PAPER
If you are willing and able to carry back some of your equity, it makes your property more valuable. It makes financing much easier and if your building is paid off you may be able to do an installment sale. This is something you need to discuss with your CPA and your real estate attorney before you move forward. If it turns out to be viable, this may bring you a higher price for your property and some additional monthly income.
CHECK YOUR RENTS
If you are able to raise your rent don’t miss out. Some cities such as West Hollywood have moratoriums. Additionally, of course, the statewide rent control (AB 1482) has limited the number of annual raises, so check to see which rules apply to your property. Check with the city where your building is located, your Apartment Association or give us a call.
CHECK YOUR CURB APPEAL
When you drive by your building, do you see cars, debris, and unattractive landscaping? You are competing with other buildings for potential tenants and a few inexpensive repairs and cleanup, maybe a little paint can result in much better rents on your next vacancy. Often, the presentation makes a huge difference, as it does in a restaurant!
What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.
We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.
Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.
Remember – KNOWLEDGE IS POWER!
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