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Multi-family properties set to become flagship products in 2022

By on January 3, 2022 0

Good news is on the horizon for owners of multi-family properties in 2022, according to projections from many real estate sources. A recent National Association of Realtors article on the subject included a quote from the National Association of Home Builders extolling that “the multi-family market is back in force! “(Nar. Real estate agent)

In its 2022 US Real Estate Market Outlook, CBRE noted that “the multi-family sector is set for a 2022 record.” CBRE is the world’s largest commercial real estate investment and services firm.

Several factors are behind the optimistic projections. Higher prices for single-family homes and low inventory, which push buyers into the rental market, are two of the most common factors. The lifting of moratoriums on evictions, planned rent increases of 7-8% and occupancy rates expected to exceed 95% are also on the list. More importantly, net operating income is expected to increase. Since the values ​​of multi-family properties are often based on the NOI, the value of the asset will increase accordingly.

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So what does all this mean for buyers, sellers and owners of multi-family properties in the Las Cruces area? Homeowners who intend to hold onto their properties will see lower vacancy rates, higher incomes, and increased values. Buyers who buy early in the year will be able to take advantage of the positive changes to increase the income and value of their properties as the year progresses.

Sellers who choose to put their properties up for sale are in a unique position. In addition to attracting local investors, Las Cruces has appeared and continues to appear on the radar of foreign investors. It is these investors who will have a significant impact on the selling prices that local sellers can achieve. The simple fact that investors who own properties in other parts of the country, such as California, where high spending and rents capped by rent controls reduce NOI and, therefore, values, are eager to move their actions to more lucrative areas of the country.

A prime example of this phenomenon is a California investor receiving a three to four percent return who shifts their equity to a Las Cruces property generating a rate of return of five or six percent or more. What makes this type of scenario unique is that in the past, many investors only bought properties that produced returns in the range of seven to ten percent. The return, expressed as a capitalization rate, often translates into the value of a given property.

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For example, an investor who pays cash and wants a nine percent return on a property that generates annual net operating income of $ 45,000 would not want to pay more than $ 500,000 ($ 45,000 ÷ 0.09) . On the other hand, an investor who would accept a six percent return would be willing to pay up to $ 750,000 for the same property ($ 45,000 ÷ 0.06). The NOI is the amount of money left over after all expenses have been paid.

The bottom line is that owners of multi-family properties in the Las Cruces area who want to sell this year have an excellent chance of success, especially if they are lucky enough to sell to a foreign investor who is moving their equity. in Las Cruces.

Meet at the fence.

Gary Sandler is a full-time real estate agent and President of Gary Sandler Inc., Real Estate Agents in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or [email protected]

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