First off, happy Fourth of July! Where’d you watch the fireworks from? Have you seen the epic fireworks fail clip from down in San Diego yet? Honestly, we’ve always wanted to know what it would look like when all the fireworks went off at once.
But that’s not what we’re here to talk about. It’s back to business now, because Dupre + Scott’s latest issue of Apartment Advisor is out, and it’s all about investing in multifamily properties. Get ready–here come the cap rates!
According to Dupre + Scott, the investment market “continues to strengthen” as rents rise and capitalization rates (cap rates) fall. This combination is pushing prices higher–but let’s back up for a moment, and look at what’s actually selling this year.
Year-to-date, $900 million in five-unit and larger buildings have sold this year in King, Pierce, and Snohomish counties. Compare that to June of last year at just $380 million, and we see that sales are rising considerably. Moving forward, Dupre + Scott project that 2012 sales will reach a total of $1.9 billion, up from $1.4 billion in 2011, and the Apartment Advisors are excited about that number: “that would make 2012 the fourth highest volume year on record. Ever.”
A moment ago we mentioned that prices are rising; but just what is the average price of a multifamily building with five or more units? As of June this year, the price averages $126,525–that’s up from $119,099 at this point last year. Another factor that contributes to these rising prices is the Gross Income Multiplier–it’s been rising since the beginning of 2011, meaning investors are willing to pay increasing costs per dollar they earn.
According to Dupre + Scott, as long as cap rates and multipliers hold steady, prices will continue to rise–and if cap rates fall at all, or multipliers rise, prices will rise even more quickly. Currently, the average actual cap rate is at 5.8%, with the average actual multiplier at 10.3%. Due to all of these factors, Dupre + Scott are prepared to forecast “significant improvement in the market for investors this year and next.” Sounds like good news to us!
For more information, including a full breakdown on the cap rates and multipliers for 5-19 unit, 20-99, and 100+ unit apartment sales in each county, check out the latest issue of Apartment Advisor here. In the meantime, happy Friday–we’ve got a gorgeous weekend ahead! See you next week.