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04/03/2005: "Good time to invest in a rental property?"

Denver has had a large vacancy rate for quite a while, but that not is not necessarily a bad thing for those looking to get into the market. With vacancy rate high, purchase prices are lower per unit. Denver just made the top tend list for apartment investing. More below...


Book lists top cities for apartment investing


PALOS VERDES, Calif. – The Center for Real Estate Studies (CRES), released today their Forecast of Increases in Apartment Rents and Median Sales Prices (see figure 1), reflecting their ranking of the best cities for apartment investment for the twenty-four month period ending September 30, 2007.

For the second year in a row, Tampa, FL and Raleigh-Durham, NC have made it to the top-ten list. New additions to the top-ten are Houston, TX, Denver, CO, and Charlotte, NC.

“We predict improved occupancies, an increase in investment capital and a sharp rise in investor return. Apartments are popular with small investors and the mortgage markets are supporting more transactions by individuals and small investment groups,” said Eugene E. Vollucci, Director of the Center. “There will be good opportunities. A strong tenant demand will accelerate rent increases, and new construction will still be modest by historic standards. Vacancies will be below 8 percent in most markets.”

The apartment vacancy rate dropped sharply during the second quarter of this year. It was down 1.6 percent from the same quarter, compared to a year ago, as the home ownership rate also declined markedly, according to Robert Sheehan, consulting economist for the National Apartment Association (NAA).

“Recovery in the rental apartment market is strengthening as a result of stronger employment and household growth,” Sheehan said. “Employers added over 2 million jobs over the year period ending in June. The stronger labor market was a major factor in producing more household formations that led to a net increase of over 2 million households over the same period.”

As the CRES exclusive forecast shows, there will be increases both in rents and prices in all but 4 markets. In addition, this comprehensive analysis of price movements projects the greatest gains in areas where high-quality apartments are targeted at empty nesters and aging baby-boomers, or where affordable housing is aimed at burgeoning lower-income and senior citizen categories.

The three cities ranked among the bottom places to invest in apartments today, include: Los Angeles, with a decrease in median sales price per unit of $420.00, Orange County with a $244.00 decrease and Orlando, FL. with a $530.00 decrease.

According to Mr. Vollucci, “Which ever area you’re considering, the fundamental laws of market supply and demand will assert themselves no matter how rapidly the market is moving or how complex investing in apartments may become. Navigating successfully in the current environment will require attention to detail and knowledge of where the pockets of top cities for apartment investing opportunities exist.”

Author Eugene E. Vollucci is a real estate advisor and founder of The Center for Real Estate Studies, a non-profit organization in Palos Verdes, California and author of “How to Buy and Sell Apartment Buildings” Second Edition (John Wiley & Sons, 2005).

Minneapolis-St. Paul fell in the middle of the pack of the top cities for apartment investing forecast of changes in apartment rents and prices for the 24-month period ending September 30, 2007, with a 2.0 percent rent increase and a $4,700 median sale price per unit.

Charlotte led with a 3.5 percent increase and a $41,900 median sale price per unit; followed by Denver (3.4/$65,200), Raleigh-Durham (3.2/$48,000), Tampa (3.1/ $49,200), Houston (3.0/$4,800), Indianapolis (2.6/$32,800), Columbus (2.5/$48,100), San Jose (2.5/ $135,300), Austin (2.1/$45,900), Seattle (2.1/$88,500), Atlanta (2.0/$46,300), Cincinnati (1.4/$30,600), Sacramento (1.4/$82,500), Chicago (1.2/ $70,800), Las Vegas (1.2/$ 49,800), San Antonio (1.2/$40,700), Portland (1.1/$54,700), Salt Lake City (1.1/$45,500), Northern New Jersey (1.0/$6,800), San Francisco (0.9/$182,000), Washington, D. C. (0.9/$84,200), Boston (0.8/$106,300), Phoenix (0.8/$43,800), San Diego (0.8/$121,000), Cleveland (0.7/$ 31,100), Dallas-Fort Worth (0.7/$34,500), Milwaukee (0.7/$42,000), Detroit (0.6/$46,300), Miami (0.6/$70,400), Fort Lauderdale (0.5/$75,400), NYC-Manhattan (0.4/$126,200), Philadelphia (0.1/$54,700), Orange County (-0.2/$121,800), Los Angeles (-0.4/$104,600), Jacksonville (-0.5/$67,200) and, Orlando (-1.0/$52,700).