With rents rising faster here than in much of the nation, Sonoma County apartment complexes are attracting buyers as well as renters.
Sales of rental complexes rebounded in 2012, and the pace has picked up this year, experts said.
"It's really strong in Marin County, Sonoma County," said Nick Grotjahn, a spokesman for RealFacts, a Novato-based apartment market research firm.
Sonoma County's average apartment rent jumped 5.3 percent to $1,407 in the third quarter, according to RealFacts. That was the largest gain from the previous quarter among 41 metropolitan areas around the country that are followed by the company.
The county's rents have jumped 10.4 percent in the past year, the fastest gain among 26 metro areas in California.
Apartment managers are reporting strong demand in Sonoma County from prospective renters. The county's average occupancy rate has climbed to 97.5 percent, up from 94.3 percent in 2009, RealFacts reported.
Demand among renters has grown due partly to a lack of new housing, experts said.
"We are in a supply-constrained market," said Scott Gerber, a senior vice president with Cassidy Turley in San Rafael.
Buyers, meanwhile, are attracted to apartment complexes partly because the return is better than for many other investments, Gerber said. As well, the county's occupancy rate has dipped below 95 percent only two times in the past 20 years, demonstrating that owners consistently have been able to find renters to fill their complexes.
As well, in recent years potential buyers have watched institutional investors snap up large apartment projects in the Bay Area and around the country.
Apartment sales slowed dramatically in Sonoma County in 2011, Gerber said, partly because investors remained concerned about the economy. That year the county recorded the sale of 12 complexes totaling $126 million, according to Cassidy Turley.
Sales increased to 18 in 2012 and to 20 for the first nine months of this year. So far this year, buyers have spent $98 million buying local apartment complexes, a lower number due to the sale of complexes with fewer units than two years prior.
Recent sales included the Cedarwood Apartments, a 35-unit complex originally built as condominiums on West College Avenue in Santa Rosa.
Cedarwood Apartments LP, a limited partnership managed by Montgomery Partners of Mill Valley, purchased the property in September for $6.1 million. Gerber represented both the buyer and seller.
The seller, RMB Real Estate Investors 1, had purchased the complex for $4.1 million in July 2012, according to public records.
While the price appreciation appears hefty, the property required $500,000 in extensive renovations, including the replacement of all the second-story outdoor decks, said Brandon Broll, owner of Fairfax-based Broll Investments, who put together the 2012 purchase. Thirteen tenants had to be evicted for dealing drugs, other criminal activity or nonpayment of rent, he said.
"I got a decent return but there was also a very high level of risk," said Broll. His apartment management team succeeded in making the upgrades and bringing in new tenants, but he recalled them looking like "we never want to do that again."
Buyers this year are finding few complexes for sale in the county.
"The demand is greater than the inventory that is out there," said Annette Cooper, an agent with Keegan & Coppin in Santa Rosa.
What's Available Right Now?
The PD's real estate blogger has created a gallery of the 18 least expensive homes available right now in Sonoma County. See them here.