Sacramento Apartment Sales 2011

This question has been raised to me several times in February... What do you think about Sacramento apartment sales in 2011, Mike? Those who are asking me already know that I have been very active and deeply vested in the California apartment selling business for 25 years.

Having both prospered and suffered from the fruit of my labor in the apartment brokerage business, people call me when they are considering buying or selling apartments in Sacramento or the Bay area regions. This month many are calling to pick my brain. The most common question is what price range or cap rate will prevail in 2011. The second question is what financing is available. The third question is what will be the occupancy and rental rate. The forth question is what deals do you know about that are under the radar, "meaning not yet advertised for sale". The part I gather for certain from all of these calls, many people are considering selling apartments and many people are considering buying apartments in 2011.

One good reason to buy is the high replacement cost compared to the low purchase price available today. Another reason to buy is the prospect of many renters n California for the foreseeable future, after they lose their homes. In general I see the apartments as more like a bond purchase than they are like an equity purchase. I like to see an honest well budgeted cash flow that will pay the owner 8% on their conservative estimates and 10% on their optimistic estimates. The deal can be structured to lower the risk by the use of conservative leverage. In general leverage can be added up to 65% of the purchase price with good terms on the financeing and the financing will increase the cash flow... but too much leverage is hard to be comfortable with these days, so 50% seems the Ideal leverage, for the portion financed in 2011.



Published by Mike Jaeger Live 2-9-2011