October 2023 Market Data
There were 6 properties that traded in October ’23 for a total volume of $11.3M. The median price per unit was $235k and the average cap rate of the deals that closed was 4.43%.
The notable sale of the month was 829 Waiaka Place & 2711 Waiaka Road. The properties were listed separately at $1.6M and $1.95M respectively. Both properties were vacant and out of service at the time they hit the market. The properties sold together for $3.1M total and will undergo extensive rehab before being placed back on the market. Download Market Comps Below!
Current Inventory Snapshot
There are 33 properties currently on the market for a total consideration of $131M. The average days on market has increased by 4 weeks to 173 days. The average cap rate of deals listed is 3.99% compared to the 4.43% of where deals are trading.
If you’re interested in receiving my Hawaii Multifamily Inventory Sheet which tracks all the active listings, consolidated into one sheet, reply to this email to be added to the distribution.
10-Year Treasury Yield vs. Cap Rate
Throughout the course of the year, there was a lot of commentary about the 10-Year Treasury Yield and investors seeking risk free returns in T-Bills as an alternative to real estate investment. The above chart shows how the local multifamily investment market compared to the 10-Year Treasury Yield. In the first half of the year, there was a lot of uncertainty regarding interest rates which justified investors looking for higher returns placing downward pressure on sales prices. During the last quarter from September through November, the Federal Reserve took a pause at raising the Fed Funds Rates and while there’s still a lot of uncertainty, there has been a lot of fear removed from the market. You can see this trend as the avg. CAP rate was slightly less than the 10-year Treasury Yield and moving in lockstep.
Asset Management Tip – Year-End Best Practices
Effective asset management is crucial for preserving and enhancing the value of your investment. Here are some tips to consider at the end of the year:
Financial Review:
- Budget Analysis: Review your current budget and compare it with actual expenses. Identify areas where you overspent or underspent and adjust accordingly for the new year.
- Tax Planning: Consult with a tax professional to optimize your tax position.
Property Maintenance:
- Year-End Inspections: Conduct a thorough inspection of the property. Identify any maintenance issues that need to be addressed and create a plan for repairs or improvements in the coming year.
- Preventive Maintenance: Develop a preventive maintenance schedule to address issues before they become major problems. This can help extend the life of your property and reduce unexpected expenses.
Lease and Tenant Management:
- Lease Renewals: Review upcoming lease renewals and assess rental rates. Consider market conditions and determine if any adjustments are necessary to stay competitive.
- Tenant Satisfaction: Gather feedback from tenants through surveys or informal discussions. Happy tenants are more likely to renew leases and take better care of the property.
Energy Efficiency:
- Energy Audit: Consider conducting an energy audit to identify opportunities for energy efficiency improvements. Implementing energy-saving measures can reduce operating expenses over the long term.
Insurance Review:
- Insurance Policies: Review your property insurance policies to ensure adequate coverage. Consider changes in property value, renovations, or other factors that might warrant adjustments to your coverage.
Market Analysis:
- Market Trends: Research the market so you’re aware of rental rates, sales comps, and other competing properties.
Financial Reserves:
- Reserve Fund: Build or replenish your emergency reserve fund to cover unexpected expenses. Having financial reserves can provide a buffer during challenging times.
By taking a proactive approach to managing your assets at the end of the year, you can position your apartment building for success in 2024.
If you're interested in discussing your goals and creating a game plan for 2024, let's schedule a time to meet!
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Wishing you a safe and fun holiday season from my Ohana to yours!
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