Real Estate News: Multi-unit properties thrive in northern Illinois real estate market
CHICAGO — The commercial real estate market throughout the northern Illinois region is in the midst of a steady but slow recovery. One sector that is anything but sluggish today is the multi-family market.
Investors continue to sink their dollars into multi-family properties across the Chicago area because these buildings remain among the top-performing assets in the region. According to sales statistics compiled by Midwest Real Estate Data, LLC, sales of buildings with five or more rental units totaled 348 properties in 2011, an increase of 27 percent over 2010. For the first quarter of 2012, sales in this property category were 14 percent higher than a year earlier.
As for apartment rents, Reis Reports estimates that the Chicago area will see an average annual increase of 3.9 percent during the next four years and a vacancy rate that will decline to just 4 percent from a current level of 4.6 percent. Landlords should benefit from both trends.
Kelly Dyson, an agent with RE/MAX Professionals Select in Naperville, Ill., agrees that strong demand for rental housing does not appear to be a short-term phenomenon. Dyson, like other RE/MAX agents, points to the high number of residential foreclosures and short sales as one major reason for the strength of the multi-family sector.
When people lose their homes to foreclosure, renting in a multi-family apartment community is often the best choice. Homeowners who avoid foreclosure by completing a short sale — selling their home for less than they owe on their mortgage loan — also often choose to rent in a multi-family property.
“Multi-family properties will remain strong until we see short sales and foreclosure sales significantly reduced,” said Dyson, who anticipates that demand from would-be renters will remain robust for the next five to seven years. During that period, he expects investors will be eager to purchase rental properties, whether in the form of an apartment complex or just single units.
According to RE/MAX agents, the housing market today is creating more renters for two major reasons. For those who have lost their homes to foreclosure, it will take five to seven years before they qualify as a home buyer again. In other cases, tighter mortgage-lending standards have encouraged continued renting by a growing number of consumers who would have been buyers during the days of the housing boom.
“Many consumers have to rent until they can get their finances in order to qualify for a mortgage loan,” said Joanne Levicki, managing broker of RE/MAX Unlimited Northwest in Crystal Lake and Algonquin.
Levicki said demand for rental housing is high enough to convince some investors to consider building new apartment complexes, something that hasn’t happened much in recent years. It also contrasts with the broader commercial real estate market today, where new construction is quite limited.
Investors who want to acquire an existing multi-family property are looking for certain amenities, according to Levicki. They want properties located close to highways, public transportation and busy shopping areas and situated in highly-ranked school districts.
Most of all, investors want to purchase apartment properties that will provide a high rate of return.
The criteria they use should be familiar to anyone who has searched for a new home, Levicki said.
“Multi-family investors seek certain key attributes that will allow them to charge the highest amount of rent. Those are the same attributes that make specific homes attractive to buyers,” observed Levicki.
Dyson, from Naperville, agrees. Investors look at location first when determining which apartment property they want to purchase. It’s a priority that benefits Dyson because of his location in the Naperville and DuPage County market, an especially strong area for multi-family properties.
“The tenants seem to be very dependable here,” Dyson said. “Employment is a little stronger. This makes it quite attractive to operate a rental property here.”
Investors also want to do as little work to their new multi-family investments as possible. They want apartment complexes that have already been renovated and that feature modern kitchens and higher-end appliances. Again, these are many of the same features that buyers look for in single-family homes.
From the June 20-26, 2012, issue