Purchasing
- Your first home
- Your next home and move
- An investment property
- A vacation home
Refinancing
- To tap your home equity
- To save money
- To avoid rate increases
- To lower monthly payments
Home Equity
- Loans and lines of credit
- Finance major expenses
- Consolidate Debt
- Invest
Baby-Boomers Sell to Avoid Hassles
Many baby-boomer
apartment
investors are selling their properties
despite the current increase in rental
rates, and prospect for future financial
gain. Kemba J. Dunham, a columnist for
The Wall Street Journal, explains
that these baby-boomer apartment owners
are selling to avoid maintenance and
other financial hassles, in her July
19, 2006 article, “Boomer Apartment
Investors Sell.”
A survey conducted by Marcus and Millchap
found that apartment
investors who sold their assets
plan to move 59 percent of that equity
to other properties,
investments and cash. “The
results are based on 700 apartment transactions
ranging from $1 million to $10 million
in the 12 months ended May 31.”
Harvey Green, chief executive officer
of the Encino, Calif., real-estate
investment brokerage firm, says
that the majority of his private investors
are over 50 because investments involving
millions of dollars are out of reach
for most young investors.
“Many of these investors bought
their properties between 1990 and 2000.
It took a while to build up equity because
of the real-estate downturn of 1991
and 1993 and the slow recovery in the
following years. As a result, many held
on to their properties longer than they
originally expected,” Green said.
Apartment investors then began to experience
tremendous equity growth. The median
price per unit of apartments in the
U.S. rose 87 percent to $112,000 form
2000 to 2006.
“A number of them found that they
were 10 years older and had a much larger
tax liability because if the tremendous
amount of appreciation.” As a
result many of them began cashing out.
Dunham wonders if this is bad timing
to sell for these baby-boomers. “As
the U.S. housing market cools with rising
interest rates, apartment vacancies
are expected to tighten to 5.3 percent
nationally this year, while rent growth
reaches 5.5 percent, the strongest since
a prior peak in 2000.’
Also, in the past two years apartment
investors have experienced total returns
of about 20 percent a year from income.
Even though these baby-boomer apartment
investors may be loosing money by selling
too early, it appears that most of them
just want to rid themselves of the stress
and hassles that are associated with
ownership.
James Shafer, a 62-year-old apartment
and condominium developer from West
Bend, Wis., sold a 164-unit apartment
complex he had built in 1990, for $11
million. This was $1.5 million lower
than the original asking price because
vacancy rate was 82 percent.
“But Mr. Shafer says he was tired
of the plumbing repairs, poor managers
and constant turnover. He recently closed
on two Eckerd Drugstores. The benefits?
‘No maintenance, no repair work,
no taxes to pay and a relatively nice
income,’ Mr. Shafer says.”
As these baby-boomer apartment investors
grow in age, they seek to have more
stability and less work and worries.