GLADSTONE, Oregon: The eight unit “rehab” multifamily property sold this fall with a price of $750,000. While the price of the property sold for below the market average in secondary apartment markets, the property itself required many upgrades at the time of sale. One of the units had been used for storage for many years as well. In order to obtain “market rents”, a buyer would most likely need to address many repair items such as roof, siding, paint, flooring, and other interior and exterior issues.
This property is an example of a “secondary market” multifamily sale, which includes markets outside of the general Portland, Oregon area. When I first started multifamily brokerage in the year 2000, these secondary (and tertiary) markets had a number of perceived “negative” issues:
-Fewer tenants to fill vacancies
-Lower rents with inability to increase rents
-Lower quality of units due to repair costs vs. obtainable rents post repair
-Apartments all had old, energy inefficient aluminum windows
However, we have recently seen over the past five years the vacancy rate below five percent in the secondary markets, most likely due to Portland becoming more expensive for apartment renters. The result: the “negatives” of the secondary markets are now positives with a higher occupancy rate and owners now have the ability to increase rents after completing upgrades to the property (i.e. vinyl windows which decreases utility bills for tenants). Many typical Portland buyers are now looking to purchase apartments in these secondary markets.
Price Per Unit: $93,750
Price Per Square Foot: $94
Estimated Cap Rate: 6%
This apartment building in Gladstone has great potential, and once it is rehabbed I am sure it will be a great place to live!