Market Market Update &
Rental Survey

SPRING  2017


Michael Burke has specialized in selling Marin’s residential income property for over 25 years. He is one of the few agents to limit his practice to this market segment.

Income property sales require an expertise that not all agents have. Many sales involve tax-deferring techniques requiring more than a casual knowledge of tax laws and practice. Income and expense statements must be analyzed, leases must be reviewed, and tenant estoppels drawn. Showing an income property takes understanding and tact. One cannot tour agents and buyers through a rental property without risking a tenant uprising.

Whether you are selling a duplex or a large apartment complex, you deserve someone specializing in Marin’s income properties representing you. Michael has been representing sellers for over 25 years and is the top producing agent in his field.

Marin Rental Update

I have been providing readers a quarterly update on rents in Marin County since 1992. The information is posted timely to my website, All statistics on the site are provided by REALFACTS, a contract data service provider that surveys 5800 apartments within 42 different large complexes in Marin for rents and vacancies. While the reported rents may not be truly “average” for many smaller apartment buildings they are very helpful in demonstrating rental trends and vacancy rates applicable to all Marin buildings and owners.

The latest REALFACTS rental survey shows that Marin’s average apartment rents at $2,640 per month. This is up 3.2% compared to the previous quarter’s rent of $2,559. The previous quarter was flat, and the quarter before was slightly down. However, even with these two quarters, rents are still up a full 4.7% over this same period a year ago and 18.3% above the same period two years ago. Rents have been rising rapidly since mid-2010 and are only in these last few quarters showing signs of slowing.

I expect rents to continue climbing into 2017, although at a more modest rate of increase. Marin’s vacancy rate increased to a high of 4.8% in the 4th quarter of 2015, suggesting that the dramatic rent increases of the previous two years would come to an end. The vacancy rate for the current quarter, however, has decreased again to a “data adjusted” rate of 2.9%. The REALFACTS reported rate for this quarter is 3.9%; however, the rate is overstated, as one large building that was being remodeled during this quarter reported a 76% occupancy rate. Taking this building out of the REALFACTS statistics brings the rate to 2.9%, which is more representative of the current overall market. Given the significant retracing of the vacancy rate, I see renewed pressure on the rental market for rents to continue rising.

Rent Control

When rents rise as rapidly as they have over the last 2-3 years we start to hear the words “rent control” or “rent stabilization” in the news. Tenant groups seize the opportunity to push City officials to enact some form of rent control to make housing more affordable. With rents rising so much faster than wages or the cost of living indexes, there is ample fuel for these tenant groups to use.

Two Marin municipalities, Fairfax and the County of Marin, briefly took rent control under consideration over the last year. After a few public hearings the tenant advocate groups lost traction and the topic has been tabled in those particular districts. However, in a meeting on May 3, 2016, the City of Santa Rosa in Sonoma County voted to implement rent control and to allow only “just cause” evictions. The decision was made official as of August 30. The City will be rolling back rents to the January 1, 2016 rates and limiting increases to 3% annually. These decisions on “just cause” evictions, rent roll back and rent control itself impact all buildings over 2 units built before 1995. A petition is underway to get these controversial issues in front of voters and is also expected to develop into a legal battle.

As responsible property owners we must take care not to add fuel to the fire. Property owners must keep rents up with the market to maintain profitability, but there is a point at which a raise in rent will make the front page of the Independent Journal. We learned after a hard fought battle with the City of San Rafael about 10 years ago that a 10% raise in rents in one year tends to be the upper limit of what is tolerable for existing tenants. I suggest extreme caution in raises above this level.

Marin Apartment Market Update

Values are up – and dramatically so! During 2008-2012 we experienced a market showing limited sales and correcting values trending lower than the highs of 2006/07. In 2016, we are again seeing the strong appreciating values we have become used to in Marin. We are at the sweet spot between a bottom and a peak. Clearly we have passed the bottom; now buyers and sellers are trying to predict if we are reaching a "top." Time to sell or time to buy; both are probably right. This makes for a healthy market.

The “Total Apartment Sales” graph demonstrates that Marin apartment building sales activity peaked in 2004 with over 60 4+ unit buildings selling, and dropped to a low during mid-recession in 2009 with less than 10 buildings selling. In 2013, we broke through the historical average by recording 40 sales for the year, and that activity continued to grow in 2014 with a reported 42 sales. We closed out 2015 with 43 sales. Duplex and triplex sales followed the same trend in recent years, as did larger apartment sales. Sale activity peaked in 2004 with 184 sales, and after falling to a low of 60 sales in 2008, climbed back up to 110 sales in 2014 and 104 sales in 2015.

There is no lack of buyers in today’s market and 2016 sales activity has been limited only by a lack of sellers. The lack of inventory, rising prices, and buyer demand present an excellent opportunity to consider a sale. Interestingly, a significant 37% of sales made in 2015 were not openly marketed on MLS and one out of every three sales was “off market.” Such a trend can indicate a tight market. To ensure you receive the highest price for your property, consider fully exposing your property to the market before accepting an offer.

Marin Apartment Sales and Values

Apartment sales are off for the first eight months of 2016 compared to the same period in 2015. We are showing only 20 sales of 3+ unit buildings in 2016, compared to 30 sales in 2015. The market has not slowed down at all; we are just very short on Sellers. Properties that do come on the market are met with multiple offers. Duplex Sales for the first eight months of 2016 have logged in 48 sales, compared to 57 sales for the same time period in 2015.

As more and more sales take place the market becomes increasingly defined. The gap between what buyers are willing to pay and what sellers are willing to accept for a sale narrows and becomes predictable. With predictability comes confidence in the Seller’s decision to sell and the Buyer's decision to pay a fair market price.

In 2016, Marin duplexes are selling between 14-20 times their reasonable annual market income (GRM); 4-plexes at 15-18 GRM; small apartment buildings at 14-16 GRM; and mid-sized complexes at about 13-15 GRM. Premium locations will be at or above the upper end of this range and inferior locations or problem properties will be at or below the lower end of the range. Cap rates are running between 4% - 5% depending upon the size and location of the property. Smaller premium properties will sell at or for less than a 3.5% rate.

Interest Rates

The Federal Reserve (“The Fed”) increased the Federal Funds rate by a quarter point last December. This was long expected and seemed to have little or no effect on real estate interest rates. Since December, The Fed has waffled back and forth on further increases and it does not look like interest rates will increase in the near term. Rates continue to hover at near record low levels with no sign of any major increase this year.

Apartment loans fall into two categories, each with different lenders. The first, 2-4 unit loans, usually have an attractive 30-year fixed rate of interest available. Lenders have strict guidelines that the property and the borrower will need to meet to qualify for the loan. Current 30-year fixed rate investor loans are at about 4.0% while owner-occupied and adjustable loan rates are lower. The second category of apartment loans is for buildings over 4 units (5+ units), usually with a minimum loan amount of $500,000. These generally have a term and amortization of 30 years but will be fixed for only a portion of that term and then convert to an adjustable rate of interest. Rates hover around 3.5% - 4.0% for loans with a 5-7 year fixed rate period. Fully adjustable rate loans are available at a reduced rate.

A New Look

In late 2014, I changed my broker affiliation to Decker Bullock Sotheby’s International Realty. Sotheby’s opened a new waterfront office in Greenbrae and were expanding into San Rafael and Novato. As I had predicted, Decker Bullock Sotheby’s International Realty became the top brokerage company in Marin for 2015 and remain so in 2016. They have the top agents and they attract high-end buyers who have the ability and desire to invest in Marin’s income properties. This is why I associate myself with the top residential brokerage firm instead of a commercial firm.

I have also recently joined “Top Agent Network.” TAN is an independent network open only to those agents qualifying in the top 10% - essentially, the agents doing 90% of the business. Many properties are introduced to the market via TAN and sold before ever reaching the open market.

If you haven't done so recently, check out my website: Aside from highlighting all of my current listings, the site offers up to date recent and historical apartment sales, rent surveys, and a wealth of information for those thinking of buying or selling in the near future. The website also features a link to sign up for weekly email updates of all Marin apartment buildings that are currently for sale. These updates are broken into 2-3 unit and 4+ unit buildings. I highlight the week's pending and closed sales as well as any new listings of Marin buildings actively on the market for sale.

Back to the top

Weekly eUpdate

Receive a detailed weekly activity report listing all properties on the open market for sale; highlighting price changes, new listings and pending sales.

Sign Up Now
Michael J Burke
500 Drakes Landing Rd.
Greenbrae, CA 94904
Lic #00454938
Golden Gate Sothebys International Realty   Realtor Logo

Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each office is independently owned and operated.

© 2017  : Marin Apartments Michael J Burke