Buyers across the Albany region right now are competing to land a certain kind of real estate — not a new home in the suburbs, but rather a multifamily home in the city.
Median sale prices for multifamily homes are up at least 50% in Albany, Rensselaer and Schenectady counties over the past three years, and the homes are selling much faster.
Single-family home prices haven’t kept up. Over the past three years, the median sale price for a single-family home in Albany and Schenectady counties grew by about 10%, and by 12% in Rensselaer County, according to data from the Greater Capital Association of Realtors.
The city of Albany, specifically, has drawn a lot of interest from distant investors who see it as a place with a reliable tenant base of state workers and college students. Because of that, much of the activity has been concentrated in the centrally-located Pine Hills neighborhood.
“We’re getting more and more calls just from out-of-area buyers,” said Shane Mahar, broker/owner at Madison Park Real Estate, who works with many of these investors.
The competition is driving multifamily homes in Albany County to sell a lot more quickly — in an average of 49 days this year, compared to 84 days in 2016.
At the same time, thousands of new apartments have been built in large apartment complexes across the region in recent years. Average rents are relatively stagnant, according to one study, a sign that the some segments of the multifamily market could be saturated.
Mahar, whose brokerage specializes in multifamily homes in Albany, said investors are basing their offers on monthly rental income, not comparable sales, a change in strategy that is pushing up the prices.
“They’re paying more than I would even touch, personally,” Mahar said. He owns about 50 units in the city with a partner, and manages another 350.
Mahar said many of the investors are paying cash for these homes — in part to beat competition in multiple-offer situations, but also because banks often won’t finance a purchase without comparable sales.
In one recent transaction that Mahar’s office handled — 606 Morris St., a two-family near the College of Saint Rose — the sale price rose significantly over nine years.
A local investor had purchased the building for $150,000 in 2010. Rents for each of the two units were $1,800, a rate split between four students paying $450 per bedroom. The home sold this year to an out-of-town buyer for $262,000 in cash, which beat out higher offers that would have needed, but were unlikely to receive, bank financing.
Many of Mahar’s clients are investors from New York City or Boston who are looking for a better return on investment than they can find in bigger metros.
At the same time that interest has increased in Albany, Mahar said, inventory has gone down, another factor raising prices. His firm keeps a database of multifamily investors in the city and cold-calls owners to see if they’re willing to sell. Many are, and they can walk away with a profit in today’s market.
The seller of 606 Morris St. had owned 10 properties and retired from the rental property business sooner than expected to take advantage of the current market, Mahar said.
For more data on median sale prices and days on market in Albany, Rensselaer and Schenectady counties, check out the charts below.