Market Market Update &
Rental Survey

SPRING 2025

MARIN MARKET UPDATE AND RENTAL SURVEY

Michael Burke has specialized in selling Marin’s residential income property for 50 years. He is one of the few agents to limit his practice to this market segment. Michael’s wife Pamela, who has been assisting for years in the background, has joined Michael as an active licensed agent.

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 a specialist in Marin’s income properties representing you. Michael and Pam have been representing sellers for 50 years and are the top-producing agents in this field.
Disclaimer: The opinions expressed in this newsletter are those only of Michael and Pamela Burke, not necessarily those expressed by Golden Gate Sotheby’s International Realty.

Marin Rental Update

The latest CoStar Group rental survey shows that, in the fourth quarter of 2024, Marin’s average apartment rents are at $2,869 per month. Rents have remained relatively flat after rising at the beginning of the year.  This quarter’s rent is 1.2% higher than in the same period last year. CoStar’s long-range forecast predicts that rents will start rising this year and continue to a level of $3,456 in 2029 (more than 16% over the next four years or about 4% per year).

The vacancy rate, which has risen slightly over two years, however, is now headed back to 4.7%. This downward trend suggests rents will start increasing at a modest rate.

Marin Apartment Values

Marin duplexes are selling between 15-18 times their reasonable annual market income (GRM), 4-plexes at 14-16 GRM, small apartment buildings at 12-14 GRM, and mid-sized complexes at about 11-14 GRM. Premium locations will be at or above the upper end of this range, while inferior locations (or “problem properties”) will be at or below the lower end of the range. Cap rates run between 4.5% - 5.5%, depending upon the size and location of the property. Smaller premium properties will sell at, or for less than a 4.0% rate.

Apartment Sales

Apartment building sales were at an almost all time low in 2023 with only 24 sales of 4+ buildings and 54 duplexes. The one year more dismal was 2009 at the height of the economic crash. The level of sales activity in apartment buildings has increased this year by 63% over last year. We are again in line with the sales activity of 2020, 2021, and 2022, back to slightly above the average number of transactions. There were an impressive 38 sales of 4+ unit buildings.  The average number of transactions in this category is 35. Duplex and Triplex sales also increased to near average transaction levels. 2024 saw 83 sales of duplexes and triplexes compared to only 54 in 2023.

What is surprising is the number of transactions that occur off the fully marketed MLS system. 14 or 37% of the 4+ unit sales were either off-market or marketed off the MLS system. Of the properties sold through the MLS, we handled 21% of the transactions or one building out of every five.

Overturning Rent Control

2024 was all about fighting local rent control in Fairfax, San Anselmo, and Larkspur. Although up against a very strong and well-funded group - the Democratic Socialists of America, we were successful in all three municipalities.  

Fairfax was the first town to enact extreme rent control and tenant protection laws in November of 2022. While we could not overturn the ordinance, we were able to get it on the ballot for voters to vote on in November of 2024; overturn it they did, by a landslide victory.

Larkspur was next. They enacted a modest rent control ordinance limiting increases to 7%. It was challenged, but survived a Spring 2024 election. This was not good enough for the DSA: they put a measure on the ballot again for extreme rent control and tenant protection. The proposal was overturned in the November 2024 election also by a wide margin.

San Anselmo, with the direction of the DSA, put an ordinance through that again had severe and extreme rent control measures and tenant protection provisions. A referendum was quickly signed by voters to put this on hold and place it on the November 2024 ballot. As you may have guessed, it was overwhelmingly overturned.
This fight has been hard, enduring, and expensive. My heartfelt thanks go out to each volunteer who made this happen, as well as all the apartment owners that put forth money to fight this. We also received financial support from the California Apartment Owners Association (CAA) and the California Association of Realtors (CAR). In Fairfax we hired strong legal counsel and an impressive campaign consultant. Yes, a lot of money, but the job got done.

Winning with this trio of victories sends a strong message to those trying to implement extreme local rent control: “Not in our Back Yard.” Let the State handle rent control and tenant protections.  

Elevated Walkways

Senate Bill 721, enacted in 2018, requires that all apartment buildings three units and above have their decks and elevated walkways inspected and repaired. The deadline for this to happen was extended one year until January 1, 2026. You have this year to get it done. The decks and walkways must be inspected by a qualified professional (structural engineer, etc.). Decks must be repaired for any dry rot or unsafe conditions and be certified as safe by the inspector. A full text of this law is available on our website (MarinApartments.com) under “Resources.”

Interest Rates

Interest rates sky-rocketed throughout 2022 and 2023 with numbers peaking at over 7%. By the end of 2023, rates fell a full percentage point. In late 2023, the Federal Reserve started decreasing their benchmark interest rate. Unfortunately, given our strong economy, the expected number of rate cuts in 2025 has dropped.

The 10-year Treasury Bill, which fell to below 4% early in the year, is now above 4.5%. This is the key index to which loan rates are tied to. The interest rate on loans has increased by about a half percent over the last six months.

Rising interest rates affect income property pricing in a somewhat different way than home sales. The anticipated return one expects on a property increases as interest rates increase. If one can get a high rate of return on a safe 10-year Treasury Bill, then the rate of return on one’s real estate investment must be equal or higher. To achieve a higher return given the same income, the price must be reduced. So, why are prices not dramatically falling? Offsetting these changes in expected rates of return are anticipated rising rents from an inflationary economy.  

Apartment building loans are divided into two types: 2-4 units and 5+ units. 2-4 unit loans still enjoy a possible 30-year fixed rate term. 5+ unit loans have interest fixed for 3-7 years, then rates adjusting for the balance of the 30-year term. The 2-4 unit loans mirror the residential market. 5+ unit loans are available on a 3-7 year fixed rate of around 6.0% – 7.0%. Call for a current quote as these rates change daily.

Insurance

The greatest hurdle in apartment sales right now is insurance. Most carriers have stopped writing new policies in California. Of those that still do, many will only insure newer buildings. Most of Marin’s buildings were built before their acceptable construction dates. The remaining carriers are very strict about their requirements. The main item on their “no” list is outdated electrical panels. Most buildings of the 1950s, 60s, and 70s were built with Federal Pacific, Zinsco or Sylvania electrical panels. These have been found to be unsafe, and companies will not insure buildings with these panels. It is not an expensive changeover, but one that must be done before a sale takes place. The cost is generally $1,500 - $2,500 per panel. Any old knob and tube wiring is also on their “no” list. In a recent sale we had to rewire a house in a five unit complex at a cost of about $20,000 before we could close escrow.

Aside from the difficulty of getting insurance, there is the cost of the policy once you find an insurer. Premiums have more than doubled and often many times more than the previous policy. Obtaining insurance can be time consuming, so start working on insurance very early on in the sale process. The high cost of insurance lowers your net income and impacts the value of your building.

MarinApartments.com

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.

If you would like a free, no-obligation evaluation of your building in today’s market, please email us at mburke@MarinApartments.com.