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Here’s What Apartment Investors Can Buy for Under $2 Million

Small Investors Play Big Role in Industry

This duplex just off the Santa Monica Freeway is listed at nearly $1.9 million. (CoStar)
This duplex just off the Santa Monica Freeway is listed at nearly $1.9 million. (CoStar)

Mom-and-pop investors own about three quarters of the more than 22.5 million apartment properties across the country, according to U.S. Census Bureau figures.

Those statistics are from 2015, the most recent available. Still, they illustrate the big role small investors have in the apartment industry. Most of the properties they own include fewer than 50 units, oftentimes duplexes.

Owners of older properties have been able to generally increase rents at a faster pace, but new ones in strong markets tend to lease up quickly.

Here’s a sample of apartment properties priced under $2 million:

This renovated property in Redding, California, is near one of the city's largest employers. (CoStar)

2139-2159 California St., Redding, California: $1.1 million

Redding, which is in Northern California near Shasta Lake, is primarily known for the timber industry, but healthcare services have become the biggest employer.

Apartment rents increased 3.4% over the past year with vacancy dropping to 3.2%, according to CoStar. CoStar data puts the average national vacancy rate at 5.6%.

Loomis-based Prominent Homes bought the 12-unit property along with another Redding property last September for $850,000. It sold the other 10-unit property in March for just shy of $900,000. The investor put the California Street property through a total renovation since buying it.

The property is within walking distance to downtown and one of the city’s biggest employers, Shasta Regional Medical Center.

A 1900 building converted into loft apartments is located in Baltimore's Pigtown. (CoStar)

760-764 Clifford St., Baltimore: $625,000

This three-unit loft building was built in 1900 and converted to loft apartments about a dozen years ago. It’s walking distance to Oriole Park at Camden Yards and M&T Stadium, home of the NFL’s Baltimore Ravens.

It’s also close to the University of Maryland Medical Center. The biggest unit in the building is available while the others are leased. Owner Neil Katz said it’s on two levels and the largest of the three. It would be perfect for a doctor who wants a place to live that’s also an investment, Katz said.

Katz is selling it because he’s getting close to retirement. “I’m reducing the size of my portfolio to simplify,” he said.

According to CoStar data, average vacancy in Baltimore is 5.9%, just above the national average, while rent growth is at 2.7%, just below the national average of 3.2%.

New construction in Old East Dallas gives an investor flexibility to sell as condos later. (CoStar)

5026 Bryan St., Dallas: $1.845 million

This five-unit building is new. It is a one of four buildings in the development in Old East Dallas.

Jonathan Rosen with Compass, the sales company for the buildings, said investors are in the process of buying two of the buildings. The idea is to give an investor flexibility later if they want to sell each of the three-story units as condominiums.

An investor could buy one building for $1.845 million, or the remaining two for nearly $3.7 million.

Dallas has been one of the hottest U.S. cities for job and population growth. According to CoStar’s Dallas market report, rent growth has slowed lately but is still outperforming the region's historical average.

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