The most interesting thing I am finding in the market today is the very strong interest from people who have never owned apartments before. Since July we have brought six properties to market and while all have sold only two sold to buyers with other apartment building investments. I think there are a lot of people looking at the apartment investment market in comparison to other investment options and finding it attractive in that perspective, not the perspective of past apartment markets or some misguided perception of how today’s market should be. In other words, the current market for high quality apartments in the 5-100 unit size range is about a 12 gross rent multiplier and a low 5 CAP rate, which when using new debt of 50-60% of the purchase price bearing an interest rate in the high 4% range, these investment should yield 4-5% cash on cash returns. This is not a bad return today and I think people with experience in other investment types are starting to realize that.
The Evanston sale was from a long term ownership family (they built it in 1989) selling to a local first time apartment building investor employed, oddly enough, in the equities advice industry. The price was equivalent to an 11.65 GRM and a CAP of 4.96. $143,750 per unit.