28-UNIT APARTMENT COMPLEX
28 Units • $6,000,000
The Harbor View Apartments are a 28-unit complex in the “Canal” area of San Rafael. There are 3-3BR apartments and 25-2BR units. Overall the building is in average condition and in need of remodeling and upgrading. Current rents are significantly below market rates. 13 of the units have restricted low rents.
The property is in an “opportunity zone,” potentially allowing an investor to remodel the units to take advantage of the significant tax savings in doing so. For a long term investor, the upside is tremendous.
The building was built in 1961 with a garden courtyard design around a central swimming pool. There is covered parking along one side of the building providing one space per tenant. The building has two water heaters and a common laundry room. Unit sizes are slightly below average, with most 2BR’s at 720 sf. Gas-fired wall heaters provide the heating and kitchens feature a gas stove.
|OVERVIEW||This property is for a long-term hold Buyer. For someone holding the property for 10+ years, the issues of the Below Market Rent restrictions go away, and the rents can be brought up to the market. For the cash buyer, there is the possible assumption of the “Rent Restriction Loan”; a forgiveness of approximately $500,000 in debt and interest will happen. The property is priced considering the current low rents, need of work and the deed restriction for below-market rents on 13 of the 28 units. The financial analysis assumes $400,000 is spent on current repair needs.The Harbor View Apartments were built in 1961. It is a two-story garden complex built around a central swimming pool with 3-3BR apartments and 25-2BR units. Construction is wood frame on a slab foundation with a flat roof.Most upper story units feature a private deck. Many of the lower apartments have patios. There is covered parking available on a 1:1 basis. There is one common leased laundry room for the tenant’s use and two water heaters serving the complex.
Apartments are separately metered for, and tenants pay their own PG&E. Kitchens have gas ranges and no disposals. Heat is by gas-fired wall furnaces.
While the apartments have been maintained and somewhat upgraded through the years, this is a building that needs substantial modernization, upgrading and repair. Most wall furnaces have recently been replaced. The roof is near the end of its serviceable life. Windows are original single pane and excessive moisture is readily apparent in many of the units. The kitchen and bath vent fans are substandard. The building did receive clearance for its most recent San Rafael strict code enforcement inspection in 2014. Call for complete disclosures and inspection reports.
Rents are significantly below the market. Projected market rents are assuming the same current condition. Remodeling should result in significantly higher rents. Many apartments do not have rental agreements. Rents and deposits to be confirmed with Estoppels to be provided.
|Opportunity Zone||The Canal area of apartments is the only area in Marin County that qualifies as an “Opportunity Zone.” Investors that want to take on remodeling this project may qualify for a substantial reduction of capital gains tax or the possibility of no tax on gains if held for the proper time period. Trading into an Opportunity Zone property allows for a possible substantial reduction in the gains of your trade property. This is a complicated tax issue that must be discussed with your financial advisor.|
|Statewide Rent Control||SB 1482 became effective on January 1, 2020. In general, apartment rents cannot be raised more than 5% plus the cost of living index in any one calendar year. The current cost of living index is at 4%, allowing for a maximum 9% annual increase in rents. Units that are under some other Federal or State restrictive program are possibly not under the requirements of this ordinance and might be able to be raised at a different rate. Section 8 tenancies and units under Re-Development restrictions, may be exempt. How the law affects this property is beyond the scope of the broker and should be confirmed by a prospective Buyer and their legal counsel.|