It has been awhile since I posted any information on apartments (multi-family) units here in Portland.  This time I am focusing on the three areas my blog covers:  RMLS#147 Lake Oswego, West Linn, RMLS#148 West Portland, and RMLS#151 Tigard.  First, however, here’s the latest information from Western Real Estate Business  about Portland:

WESTERN SNAPSHOT, OCTOBER 2009

Portland, Oregon, Multifamily Market

1. MARKET MOVES

Three significant Portland multifamily buildings delivered downtown in the first two quarters of 2009: Cyan/PDX (352 units developed by Gerding Edlen Development), the Ladd (332 units developed by Opus Northwest) and the Riva on the Park (294 units developed by Trammell Crow). Downtown Portland has historically been a healthy submarket for multifamily and much recent construction has been centered there, so the area is now becoming very competitive. All three of the aforementioned projects are also pursuing LEED certification, which appeals to Portland’s urban tenant.

2. MARKET MEASURE

Vacancy is an important factor in Portland’s multifamily market as it is an indicator of the overall market’s health. The vacancy rate has been trending upwards in recent quarters, which should continue in the second half of the year. It’s important to note that the increase in vacancy is due to economic pressure on tenants, not migration of people out of the metro area. Expect vacancy to regain its footing in the summer of 2010 or when economic conditions improve.

3. THE MARK OF A MARKET

Portland’s Urban Growth Boundary (UGB) sets it apart from other multifamily markets in the West. The UGB has prevented overbuilding in both the single-family and multifamily markets in the last 5 years. So despite the recession, Portland’s apartment market has remained relatively healthy and under built, aside from some significant building downtown. This leaves Portland’s multifamily market in a strong position and set for a robust recovery when the economy improves.

— Robert Black is an associate vice president specializing in multifamily investment sales at NAI Norris, Beggs & Simpson in Portland.

Norris Beggs & Simpson reports that:

Landlords are doing everything they can to attract the fewer active renters in the market. Concessions today in certain submarkets are sizeable, including up to two months free rent on a 13-month lease for some new properties in the downtown area. Renters looking for a new place to live are shopping around for the best deals they can get, and existing tenants are also tuned in and looking for bonuses to extend their leases on expiration.

Despite the impact of the recession on the apartment market, Portland is in a good position for the upswing. U.S. News & World Report recently named Portland and its commercial market one of the ten cities “primed for a real estate recovery,” due to its green economy and overall economic health. When the job market and overall economy starts to improve, Portland’s multifamily market will be in a strong position for a rebound.

APARTMENT – MULTI-FAMILY STATS (Click on the RMLS# for property specifics and will only be in effect for a limited number of days):

APARTMENTMulti-FamilySTATS
	RMLS #147 Lake Oswego	RMLS# 147West Linn	RMLS#148West Portland	RMLS#151Tigard
Q1
# Complexes Sold	0	0	2	0
			RMLS#8106826
			RMLS#8101633
High Sold $			$1,050,000
Low Sold $			$792,500
Average Sold $			$921,250
Days on Market			62
% of Sold Price vs. List Price			87.24%
Q2
# Complexes Sold	0	1	5	1
		RMLS#8071839	RMLS#8044472	RMLS#8048377
			RMLS#9016980
			RMLS#8101280
			RMLS#7083661
			RMLS#8106074
High Sold $		$525,000	$825,000	$280,000
Low Sold $		$525,000	$320,000	$280,000
Average Sold $		$525,000	$447,957	$280,000
Days on Market		300	276	275
% of Sold Price vs. List Price		95.45%	81.1%	93.65%
Q3
# Complexes Sold	0	0	1	1
			RMLS#9008727	RMLS#9011509
High Sold $			$251,400	$249,000
Low Sold $			$251,400	$249,000
Average Sold $			$251,400	$249,000
Days on Market			154	189
% of Sold Price vs. List Price			100.6%	89.89%
FOR SALE NOW
# Complexes For Sale as of10-28-09	5	8	32	10
Source:  RMLS

 

How To Calculate The Cap Rate

Short for capitalization rate, Cap Rate is one of the most widely used formulas by real estate investors when analyzing investment property. It’s a component of return on investment for an investment property as it relates to the Purchase Price and based on the amount of Annual Net Operating Income the property will yield (not including mortgage payments or considering income tax) in proportion to the purchase price of the property. 

Cap Rate is calculated by taking the Annual Net Operating Income of the investment property and dividing it by the Purchase Price. 

So, the Cap Rate formula is: 

Cap Rate = Annual Net Operating Income (not including mortgage payments)/Purchase Price 

Note: when calculating Cap Rate, a higher resulting number is better.

Cap Rate Example: Let’s say you purchase a property for $100,000 that produces an annual net operating income of $5,000; this property would have a Cap Rate of 5% (5,000/100,000). Based on this calculation the property will generate 5% of the purchase price in income (not considering income tax) per year. If you were looking at another property with a purchase price of $100,000 that produced an Annual Net Operating Income of $8,000, this would obviously be a better deal with a calculated Cap Rate of 8% (8,000/100,000).

Note: A typical Cap Rate for investment properties ranges between 5 – 8% with an 8% cap rate typically viewed by seasoned investors as the more desirable type of investment.

Source:  In part – InvestorLoft

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