Though the owner was ready to move on from apartment investing, a common thread to many older apartment sales these days slowed the transaction for Villa Serrano in Carmichael.
Broker Tim Swanston of North Coast Commercial said the 1970s-vintage of the
electrical panels for the 43-unit property meant upgrades had to be done to
satisfy insurers before the sale closed.
“Insurance companies are looking for reasons to say no,” he said, but after the
work was complete, the apartments at 5241 Marconi Ave. sold to Yung Lee in an off-market deal for $7.3 million, closing July 3.
The sales price was a 50% gain over the property’s last sale, in 2017 for $4.85
million. Under the new sale, the property is valued at nearly $170,000 a unit.
According to Apartments.com, Villa Serrano has two-bedroom apartments of
900 square feet each, with asking rents of $1,375 a month.
Swanston said the seller, Steve Morton, decided to cash out of a well
maintained property that was 95% occupied at the time of sale. Lee, who did
not return a call seeking comment, owns another apartment property nearby,
so the prospect of efficiencies made sense for him to buy, Swanston said.
“It went through OK, but it took forever to get plans and permits approved for electrical work,” said Morton, who added he decided to move on from ownership because he was concerned about the policy direction of California. “It made sense for me to make some changes.”
But like many older apartment properties, aging components made Villa Serrano trickier to sell. Insurance companies have been reluctant to sell a policy if properties from the 1970s or older aren’t upgraded. Built in 1967, Villa Serrano’s electrical infrastructure had more than a half-century of use, raising the chances for wearing out, Swanston said. Even with a few headaches along the way, the sale is a sign of better prospects for multifamily as a sector, Swanston said. More deals are closing with only 30% down, when 40% down was more common in the last few years, he said.
“If something is priced right, it moves,” he said. Swanston represented the buyer in the deal, while Kevin Hemstreet of North Coast Commercial represented the seller.
