Fort Myers, Fla. – RealFacts, a Novato, Calif. based data company, recently named Southwest Florida first in apartment occupancy growth in the state for complexes with more than 100 units.
“There are several reasons why apartments are seeing this increased demand,” said Jim Garinger, CCIM, SIOR, principal and managing director of Colliers Arnold in Fort Myers, Fla. “The primary reason is the high number of foreclosures. When a home is lost to foreclosure the owner doesn’t typically become homeless; they manage to find another roof to live under.”
In 2007 and 2008, renters could find a nice house with a backyard for less than advertised apartment rents. However, the owner of the house from whom they were renting may have had troubles of their own. The low rent was not enough to cover the mortgage, which was based on the inflated value they borrowed against. The tenant is suddenly surprised to hear they have just a few days before they have to move out of a foreclosed property.
“Since the tenants are tired of being kicked out of foreclosed homes, they return to apartments which they view as a more tried and true approach to renting,” said Andrew Falde, CCIM, investment specialist with Colliers Arnold. Considering Lee County, Fla. has been at or near the top position in foreclosures in the United States during much of the past six months, it is likely this increased demand of renters looking for dependable housing will continue.
Park Crest at the Lakes, a 360-unit apartment complex located just off Daniels Parkway in Fort Myers, Fla., recently achieved 100% occupancy according to according to the leasing office “It took approximately four and a half months to get from 70% occupancy to 100%.” “Stronger demand is causing apartment units to fill up and we anticipate rents will slowly begin to follow,” said Garinger. The oversupply of Southwest Florida homes that built up from 2005 to 2008 has been selling off in high volume.
According to Garinger, some of these houses may come back on the market to compete as affordable rentals, “however, our team expects the spread in rents between Southwest Florida houses and apartments to stabilize during 2009.”
With the major impact a foreclosure makes on ones personal credit, foreclosed homeowners will not be able to obtain a mortgage for many years. “As a result, we expect apartments to see sustainable demand for the next five to seven years,” said Falde. “We believe multi-family investors should return to acquisition mode during 2009. Their focus should be on buying properties based on the current low income levels and to add value by increasing occupancy, not just by waiting on inflation.”
Most properties are being financed using assumable debt. According to Dr. Randy I. Anderson, professor of economics at the University of Central Florida, around 50% of transactions are being financed this way. A distant second for transaction funding is international banks, followed by national banks and insurance companies.
Sellers in disposition mode should review their loans, talk to their lender, and fully understand the terms and conditions required to assign their mortgage. All this should be done prior to marketing the property, as it will be a key point in attracting buyers.
