Market Market Update &
Rental Survey



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 to have 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.

Disclaimer - The opinions expressed in this newsletter are those only of Michael Burke and not necessarily those expressed by Golden Gate Sotheby’s International Realty.

Marin Rental Update

A quick note about my sources: In the third quarter of 2016, after REALFACTS data service stopped operations, I transitioned to using the CoStar Group. CoStar Group’s database is much larger than that of REALFACTS and includes rent data from 651 Marin apartment buildings, 5 units and above, totaling 15,406 units.

The new CoStar Group rental survey shows that in the first quarter of 2021, Marin’s average apartment rents are at $2,545 per month. This is up slightly from the previous fourth quarter 2020 rent of $2,533. After seeing rapidly rising rents between 2011 and 2015, rents have settled into a more moderate pattern of increase and recent flattening. Rents are just starting to tick up again. The long-range forecast for rents by CoStar suggests that rents will begin rising this year and continue into the foreseeable future. CoStar suggests rents will rise more than 14% over the next four years or about 3.5% per year.

The vacancy rate has remained relatively steady over most of last year to the current level of 4.5%. This level of vacancy rate would normally suggest rental rates will remain flat or start a period of decline. Co-Star research, however, forecasts the vacancy rate will drop dramatically going into the immediate future with rising rents.

Marin Apartment Market Update

The “Total Apartment Sales” graph demonstrates that Marin’s apartment building sales activity peaked in 2004 and then dropped to a low during mid-recession in 2009. We reached an average sales volume again in 2013-2015. Sales dropped off in the following years simply from a lack of Sellers. Duplex and Triplex sales remain below-average also due to a continued lack of Sellers in the marketplace; well-priced properties sell quickly.

The passage of Statewide Rent Control (AB-1482) that went into effect January 1, 2020, was expected to slow down the market for a period as Buyers and Sellers try to determine what effect this bill will have on apartment values. I have yet to see any slowdown. We are still experiencing extremely limited inventory of buildings for sale and many Buyers are ready to buy. Apartment buildings with rents far below the market will experience a discount in their value as Buyers will need many years to get the building’s rents back up to market.

AB 1482 limits the amount that you can raise rents on existing tenants during any 12-month period. While you may raise rents up to two times a year, your total increase in any 12-month period cannot be more that 5% plus a cost-of-living index. For the Bay Area, this cost-of-living index was initially at a high 4%, allowing increases of 9% per annum. The index is adjusted each year for the April Cost of Living Index. Given the current economic turndown, the index as published for April 2020 is 1.1%. Until this index is updated this April, the maximum increase in rent will be 6.1%.

Marin Apartment Values

Marin duplexes are selling between 16-20 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.

Covid-19 Impact

These are unusual and unprecedented times. All are concerned about the health and safety of not only our loved ones but the world as a whole. Living under shelter-in-place orders limits our ability to do business as usual and the orders are changing week by week. The County of Marin acknowledges that Real Estate is an “Essential Business”; however, they have placed very stringent limitations on what is and is not allowed in the business of how properties are sold.

Over the last month or so we have been asking our clients and readers their opinion on the marketplace. With all that is going on, is it still a “Seller’s Market”, do you see rents and prices continuing to go up or declining? We are early into the research; however, early results show our readers have a strong confidence level in the market. Still very much a “Seller’s Market”.

Impact on Sales

It is not business as usual.Throughout the Bay Area and specifically Marin, agents are not allowed to hold open houses or broker opens. Showings of properties are to be done virtually to the greatest extent possible. When a property cannot be effectively viewed virtually, it can be shown by following a strict set of guidelines. Communications are by phone, email, and Zoom meetings. Documents between agent and client need to be signed electronically or through the old-fashioned method of mail. Closing documents from title and escrow companies are being done by a mobile notary.

While a buyer may not be able to see the property in person as readily as before, most property inspections are allowed. Termite reports, engineering, environmental assessments, etc. are considered life-safety/health issues and are generally permitted. City resale inspections are hit and miss; some cities deem them essential, and others no longer perform the inspections. Photography and floor plans can be done, although each provider may have their own set of safety protocols.

Surprisingly, with all such hoops to jump through, sales are still taking place. Sales activity, in fact, is quite strong and only limited by a continued lack of inventory. Residential home sales were up 64% in January over the prior year. Sounds like a good time to be a Seller.

Impact on Rentals and Tenant Rights

To protect tenants that have been economically affected by the COVID-19 pandemic, several laws have been recently enacted. They seem to change daily. Senate Bill (SB) 91 is the most recent and all-encompassing law that is designed to benefit not only tenants, but landlords as well.

This bill extends until June 30, 2021, the eviction moratorium previously established under Assembly Bill (AB) 3088 (Evictions for “just cause” are allowed). The tenant is required to make a financial hardship claim and pay at least 25% of their rent due for the period September 1, 2020 through June 30, 2021. For tenants claiming a financial hardship due to COVID-19, It allows a procedure for not only their continued occupancy, but a forgiveness of the past due rent coupled with a partial reimbursement to the property owner.

The landlord can be compensated 80% of the balance of the unpaid rent due during this period. With the landlord’s agreement of these terms, this will vacate the debt of the tenant to the landlord. The landlord is also, under this program, allowed to recapture 80% of unpaid rent for the period April 1, 2020 through August 31,2020 providing they agree to forego the other 20% due from the tenant. To qualify for these, the tenant must not have earned more than 80% of the area median income at the time of the application.

If you have a tenant who is behind in rent due to a hardship associated with COVID-19, it is important that you provide that tenant with the proper notification of the program paperwork. This should have been done by February 28, 2021.

In separate local legislations, a few areas in Marin have enacted a “rent freeze” through December 31, 2021. This only affects downtown Novato, Novato south of Ignacio Blvd, the Canal area of San Rafael, Marin City, and much of West Marin.

In a recent survey of owners and property management companies in Marin, a surprisingly small percentage of tenants are opting to make a COVID-19 hardship claim and not pay all their rent due. Approximately 95% of all tenants in Marin are current with their rent.

If you have not done so recently, check out our website, Aside from highlighting all my current listings, the site offers information on all of Marin’s income properties for sale, up to date recent and historical apartment sales, rent surveys, and a wealth of information for those thinking of buying or selling soon. The website also features a link to sign up for weekly email updates of all Marin apartment buildings that are currently for sale, that have sales pending, and those recently sold.

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Michael J Burke
500 Drakes Landing Rd.
Greenbrae, CA 94904
Lic #00454938
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