Banner Year of 2018 Continues in the Three-Family Market, But MLS-Listed Two-Family & Three-Family Take a Nominal Price-Per-Square Foot-Hit as Numbers Fall
Key Takeaways:
Low turnover rate of three-family properties
Sale of 30 Maple Street sets a multiple of 228x gross rents – the gold standard for income-producing three-families in 2019
Lower activity at top end of the three-family market as only two three-families trade for over $2.5mm (down 50% from 2018)
Cambridge exhibited anomalies as price-per-square foot of private sale three-families outpaced MLS-listed-three-family property sales
Market Insight: Cambridge continued to be a tight market, while sales followed a trend in Greater Boston of lower gross sales volume. Of the 1,204 three-family properties in Cambridge, saw only 28 of them turnover in 2019. That converts to a 2.32% turnover rate.
Three-family owners had reason for pause, as there was a decline in the price per-square-foot of MLS listed homes. In 2019 the total number of MLS-listed sales three-family sales came in at 21, while the average price per-square-foot measured up at $520. In comparison, in 2018 there were 26 sales that happened resulted in an average price-per-square-foot of $563 – a decrease in the average sales price-per-square foot of MLS-listed three-family homes.
In 2019, the top-end of the three-family market saw fewer properties sell for over $2.5mm – those sales closed at $2.55mm (406 Broadway) and $2.4mm (34 Maple Avenue), the highest priced three-family sale in 2019. As was the trend in Brookline, we see a banner year in 2018 make the numbers appear to be worse that they are.
The three-family-asset at 31 Maple Street, was represented to generate $14,900/month. This equates to a multiple of 228x gross rents. Properties that trade at this high of a multiple are only found in Tier-1 markets with assets that obtain market rents at the time of sale. These assets will sell to buyers who are willing to pay a premium for well located, income-producing properties, which is a consistent theme throughout this report. Nowhere else is this more clear than in Cambridge.
Outlook for 2020: With Cambridge’s close proximity to two world-class universities, Cambridge represents a hub for international income-buyers. Some of that international money has dried up, and with the 2020 coronavirus impacting global equity markets, that will, in my opinion, impact the international money investing in Cambridge multi-family real estate. However, due to the inherent characteristics of built-in demand, close proximity to Boston, public transportation, and appeal to own both income and condo-conversion property, Cambridge will remain arguably the top place to own multi-family properties in Greater Boston. Expect Cambridge to remain solid in 2020.
In Cambridge in 2019, investor-sellers paid an estimated $11,111,806 in capital gains taxes to the Federal Government. For creative strategies to defer taxes and build generational wealth, please see my ‘Free Cash Flow’ Program for sellers..
Please make sure to check out my market reports in Brookline, Somerville, Chelsea, Everett, Malden, Watertown and Quincy. If are interested in selling, please check out my ‘Demand Driver’ or ‘Value Maximizer’ Programs for multi-family sellers or call/text me at 617 272 5440.
