The stars have aligned for Dane County multifamily investors.
Rental vacancy rates continue to move to new lows. According to MG&E, the Madison multifamily vacancy rate was just 2.16% in Q4 of 2011, well below the 5.7% vacancy rate from 6 years earlier.
The strong tenant demand for rental housing has allowed many investors to raise their rents over the last several years.
And, Dane County income properties are now selling at a 32% discount from the properties that sold in 2006. Our latest gross rent multiplier report shows the average investor in 2011 could receive the same rental income as the average investor in 2006, but at a 32% lower purchase price.
How long will multifamily purchase values continue to improve from the investor's perspective? It's difficult to predict the future, but we believe the values we are seeing right now may end up being the best we'll see. As you'll see from this report, the purchase demand for rental properties is beginning to rise, although it remains low from a historical perspective.
We are also seeing evidence that some renters are finally deciding now is the time to switch from renting in favor of owning a house.
We do believe we will see a gradual increase in rental property purchases this year, but from a historical perspective multifamily purchases will remain low. Also, although some renters are turning back to owning, we believe rental vacancy rates will remain at very low levels for the foreseeable future. Tenant demand for rental housing will remain very strong.
The multifamily investor will continue to find excellent values in 2012, but it's very possible we'll see multifamily sellers begin to gain some leverage as the market dynamics slowly shift in their favor.
Do you have questions about buying or selling multifamily real estate in our market? Please contact us for a no hassle consultation. We're here to learn more about your goals, and offer you our thoughts on how you can achieve them.
Dan Miller, Realtor, Keller Williams Realty and www.DaneCountyMarket.com
Madison WI partner in the top 1% DaneCountyMarket.com real estate team. Expertise: single family homes, condos, short sales & multifamily real estate. Visit OurRecentSales.com for our recent closings.
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