Apartment market is heating up
| Saturday, Dec 17 2011 09:00 PM
Last Updated Saturday, Dec 17 2011 09:00 PM
Nervousness about other investment options is whipping up a frenzy to buy multifamily residential properties in and around Bakersfield.
Partly it's because prices for duplexes, apartments and other multifamily homes are the lowest they've been in years, and interest rates are likely to stay at historically low levels for a while.
But it's also the economy.
Investors who normally would look to stocks and bonds are wary of the plight of the euro and partisan budget fights at home, and a savings account is only slightly more profitable than socking money away in a mattress.
"Investors want to deposit their capital in more stable vehicles, and multifamily housing in Kern County is a place where you can get strong cash flow almost immediately," said Raju Jassar, a broker in the Bakersfield office of Keller Williams.
And there's healthy demand for rental units among tenants, Jassar added.
"Because our economy is based so heavily on the necessities of oil and agriculture, we've been a little more insulated than some areas from the impact of the global economy," he said. "Employment levels are getting better and there's plenty of demand for housing."
That demand is due in part to the high foreclosure rate in the Central Valley, said Frank St. Clair, who with family members is generally recognized as the owner of the most multifamily housing in Kern County --some 1,250 units.
"The majority of our renters are people who used to be homeowners, but foreclosures have driven them back to the rental market," St. Clair said. "Even if you lose your home, you still need a place to live."
There's very little construction of new multifamily buildings and complexes because fees and mandates have made it expensive for developers to build them, but you can snatch up existing units and usually rent them immediately with few or no improvements, St. Clair said.
The spike in demand and low inventory have made getting your hands on a property challenging, though.
"It is pretty amazing to try and get an offer accepted right now," said Miramar International's Troy Lei, who with a partner owns about 25 area rental units, and also manages properties for other landlords. "It's a real dog fight."
Lei said he expects the supply squeeze to lighten up a little early next year, though. Lenders generally don't like to foreclose on people during the holidays, so foreclosures slow in the fourth quarter and pick up again in the new year, he said.
Abel Ramos of A&A Realty called multifamily listings "an easy sell," noting that his latest property generated calls daily, all from out of town investors who see that Bakersfield income property is a value.
"I don't know why people in Bakersfield aren't jumping on this," he said.
Marc Thurston, a senior vice president for Grubb & Ellis | ASU & Associates in Bakersfield, specializes in multifamily housing and said he's been "super busy" all year.
Within days of getting a listing, he has at least one offer on it, and multiple offers by the end of the first week are typical, Thurston said.
Most of them are all cash offers, Thurston added. It's not that you can't buy if you have to get financing, but bidding is so cutthroat that "it really helps to have cash if you want to be competitive."
Prices are at lows not seen since 2007, Thurston said, and occupancy rates are upwards of 90 percent for even C- and D-level properties.
The median sale price of two- to four-family dwellings in the Bakersfield area was $380,000 in 2007, but has since fallen to $107,000, according to Gary Crabtree, owner of Affiliated Appraisers.
The market had 158 multifamily residential sales transactions year-to-date as of last week, Thurston said, so just midway through December the area already is ahead of the 156 deals done in all of last year.
