|
Fresno Area Rents Analysis
First Quarter 2008
By Larry Hawkins, Investment Broker
The single-family rental market has seen an increase in number of homes for rent. This is because many would be sellers are unable to sell their homes in the current resale market and instead of selling are forced to convert the property into a rental. This increase in available rental homes has kept rent incomes for houses at a flat rate for the past two years and those rental rates will continue flat for the next 24 months or so. Vacancy remains low due to population growth and foreclosures forcing previous horne owners into becoming tenants.
The apartment market is a different story. Most multi family buildings in the Fresno market were built in the 1960-1970 era and rent on those units average $625 per month for a typical no frills two bedroom one bath.
Due to the cost of construction, newer units average $1200 plus per month. These units are larger and corne with a list of amenities but because of the much higher rent are in a different market than the older units.
So we have a limited supply of older units available at the lower rents and a projected doubling of population over the next 30 years. This puts pressure on those lower rents for rent increases. Fresno has one of the highest concentrated poverty rates among the larger cities in the nation. This adds even more demand in this low-end limited supply market. Fresno market has seen some rent increases but rents here are still well below other areas of California.
Chris Bates of RealFacts Inc. conducts regular surveys of rents throughout the West. According to their findings Fresno rents climbed an average of 3.5% from March of 2005 and March 2006. Manco Abbott, a Fresno property management firm that manages 5,000 units in the Fresno area reports that some rents rose as much as 5%.
Compared with other urban cities Fresno is a real bargain when it comes to apartment rents. The average rent in Orange County is $1,484 - in San Jose $1,359.
According to Bates, Fresno with an annual rent increase of3.7% and occupancy of 94% to 95% Fresno is "poised" to be a market that is in" perfect balance". Investors are getting a return on their investment and they have a stable occupancy but enough vacancy for renters to have a choice.
My personal opinion is that the 95% occupancy rate is an Average but my personal observation is that the newer units with higher rents have a lower occupancy rate and the older lower rent buildings have a near 100% occupancy. Thus the "Balance" is here statistically but the real pressure for rent increases is in the lower rent buildings. Put those figures together with the projected growth in population and you will see more and
more pressure on these lower rents. This results in an out of Balance situation that I believe will be of tremendous benefit to investors as those market forces work to increase rents. I believer rent increases in these lower end units will be in the 8% range for years to corne. Do the math on this and Fresno units look better and better.
For information
on houses, see my Single
Family Homes as Income Properties and Fresno Housing Market articles.
For current information
on apartments, see the Multi
Family Income Properties page.
This article presents discussion of how projected rent
income changes can dramatically increase cash flow and as a result, increase
the overall value of the property. Also included are links to worksheets
for the Estimated Cash Flow of
a 4plex and Estimated
Cash Flow for 12 units.
|
