[caption id="attachment_19366" align="alignleft" width="108" caption="Katherine Higgins"][/caption]
The good news for Marin County landlords is that after two years of declines, asking rents moved up 2 percent by the end of 2010.
Rents are expected to continue climbing this year by another 2 percent as the economy recovers and the local distressed single family market is producing more renters.
After talking with owners this quarter, I can confirm that rental increase notices are going out in Marin to many tenants who have not seen increases in years. Most landlords will be very conservataive with increases, with $50 to $100 per month being the norm. Tenants are not complaining.
A survey of Craigslist online rental ads and recently released apartment rental date from RealFacts of Novato show that southern Marin cities are experiencing the biggest rent jumps.
Last year, a two-bedroom view unit in Sausalito rented for $1,995 per month. This year that same apartment is renting for $2,175, a 9 percent increase.
In San Rafael, typical two-bedroom unit rents were $1,400 to $1,495 for the past several years. This year asking rents increased to between $1,550 and $1,575, up 11 percent to 13 percent, for two bedrooms and $1,250 for one.
In San Anselmo, rents are also moving up. Last year, one owner told me he was struggling to fill his downtown building at $1,440 for two-bedroom units. This year he is renting the same units for $1,550 to $1,575, up 8 percent to 9 percent.
With the upward movement in rents, local real estate investors are now moving aggressively back in to the apartment market. Marin multifamily property sales activity has been very slow to recover, with only a handful of sales recorded in the past 24 months. But that is changing.
With the smallest apartment inventory I have seen in years, eager buyers are now purchasing off-market deals throughout the county. Last year about half the transactions I completed never hit the market.
In Southern Marin, capitalization rates remain at around 4.5 percent, as evidenced by two Sausalito sales that I participated in. One was 15 Second St., a nine-unit building that sold for $3.05 million. It had originally been listed the year before for $3.495 million. The second was seven units sold this month at 257 San Carlos Ave., for $324,000 per unit at a 4.5 percent cap.
A third off-market sale in the city, five units at 30 Excelsior Lane, sold for $2.2 million. It had been listed last year for $2.5 million.
In cental Marin, cap rates from 5 percent to 6 percent, with only a handful of apartment sales recorded from $1 million to $1.8 million in 2010. Those sales were distressed-loan sales in which the owners were highly leveraged and could not pay the debt service.
In Novato, several apartment sales closed, with cap rates at 6 percent, or $142,000 per unit. The gross rent multipliers for these deals were in the 11 range.
I see apartment prices stablizing in 2011, as more investors are competing for fewer properties. Exchange buyers are now in the market again and will start to push apartment prices up. With the strict timeframes for Section 1031 exchanges, many exchanging buyers need to reinvestment their profits in order to avoid capital gains taxes.