Multifamily 2-8 Unit Market Update

This is Jonathan Aceves with an update on Multifamily Transactions in the 2-8 Unit Space for 2019.  Here’s the Spreadsheet: 4th Quarter Market Report.   

 

Overall, the market was steady in small multifamily for the year.   The average price per door was $58,256, with an average Gross Rent Multiplier of 7.56.  Anecdotally, we have seen overall interest in Downtown multifamily increase significantly.  

Downtown, we’re seeing rents increasing, and I think this is helping to drive investors to renovate buildings and put make new product available.  The 8-unit complex we sold on Fourth Street I don’t think would have sold two years ago, but rising rents made the property compelling for an investor willing to upgrade the units and reposition the property to students and young professionals.  

 

We reviewed 36 transactions from 2-8 Units, with an average of $58,256 per door, and an average GRM of 7.56.  Average price per foot was 64.07. We did find that GRM went down slightly over the year.  There was one outlier, and when removed the Average GRM was 7.77. 

 

We’ve shown Days on Market by this box and whisker graph, and it shows that 50% of all transactions closed betwen 50-150 days.  There were some transactions that closed over a much longer period, one over 300 days and one at over 700 days.  The overall average was 116 Days.  I think what this shows is that if priced correctly and adequately marketed a multifamily property should close within 4-5 months.  

 

My experience has been that if priced correctly, a multifamily property in this category should go under contract relatively quickly.  We tend to suggest pricing a property with a fair margin to an investor, using market financing assumptions.  Here’s a simple spreadsheet you can use to help think through a multifamily deal: Basic Multifamily Underwriting Worksheet.  

Thanks for reading!  What do you make of the numbers?  What’s your opinion of the market?  

 

 

 

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