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O.C. BUSINESS PLUS | HEARD ON THE BEAT / REAL ESTATE

As Rents Rise, Chances of Buying a Home Fall

September 05, 2000|Daryl Strickland | Daryl Strickland covers real estate for The Times. He can be reached at (714) 966-5670 and at daryl.strickland@latimes.com

Over the next 12 months, Orange County will remain a landlord's paradise.

Rents in the largest apartment complexes are expected to rise an average of 8% in that period to $1,194, according to a forecast by Marcus & Millichap Real Estate Investment Brokerage Co., a Palo Alto-based company that specializes in multifamily properties. In smaller, older apartment buildings, renters could face increases of 4% to 5% to about $840, the company predicts.

Despite strong job and population growth, fewer new units will be built in Orange County than in each of the last two years because land is too scarce and too costly to develop, said John Przybilla, a regional manager at Marcus & Millichap in Newport Beach.

As a result, investors are turning to older units in central Orange County that can be renovated. Lyon Capital Ventures, for example, bought the Cedar Glen apartments, a 264-unit complex in Fullerton, this summer from Mitsui Real Estate Sales U.S.A. Ltd. for $22.2 million. The Newport Beach investment company, which owns 4,000 apartment units in the county, is planning to spend $8,000 to $10,000 per unit on renovations that include new kitchen appliances, new carpeting and landscaping.

"I see the market as being very strong for quite a long period of time," said Jay Burns, Lyon Capital's director of acquisitions.

In the first half of the year, 86 apartment buildings have been sold, compared to 100 a year earlier, Przybilla said. But he expects sales to increase as interest rates edge down and buyers take advantage of new loan programs that allow lower down payments.

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