Investors often wonder what the prefect location for a rental unit is as they are looking to purchase a new income property. They ask about neighborhoods, demographics, local amenities, proximity to universities and shopping, etc. Another important factor to consider is access to public transportation. This article from today’s Denver Post illustrates the additional income that is possible with a unit within walking distance to Denver’s light rail system.
People are willing to pay about 4 percent more a month to rent an apartment within a quarter-mile of a light-rail stop.
That’s pushing vacancy rates down in those communities, and the cost of land near transit is going up, according to a recent analysis of the apartment market by Grubb & Ellis.
“We do have a really young, educated work force that will pay a premium to be near light rail,” said Tom Wanberg, senior vice president of investment services at Grubb & Ellis.
Unimproved apartment land sales in Denver from 2006 to 2010 show developers pay an average of 25 percent more for properties within a quarter-mile of an existing or planned transit stop, the analysis found.
“Five years ago, when you put a property on the market, I don’t remember anyone asking if it was close to transit,” said Steve Rahe, senior vice president of Grubb & Ellis’ multifamily investment group.
Of the 30 apartment communities surveyed along the southeast and southwest light-rail lines, 19 were built after the system was operational.
Proximity to transit ranked second only to geographic location as a driver in resident leasing decisions, the survey found. Common-area amenities were the third-most important.
“People find they can get on light rail and have quicker access to the downtown area or, if they live downtown, out to the Tech Center,” said Gordon Von Stroh, professor of business at the University of Denver. “It’s more appealing to the urban-oriented younger professional that is willing to make some changes and look at transportation from a different perspective.”
The largest demographic group leasing properties near transit stops was college students, with an average resident population of 40 percent, according to the Grubb & Ellis study. Professionals in their 30s ranked second, accounting for 35 percent of apartment residents near transit.
As the region’s light-rail system gets built out, more people are likely to be drawn to apartments near rail stations.
“The more cogs of the wheel that are filled in with new rail lines, the more people are going to want to use transit,” Wanberg said.
In 2004, voters approved a 0.4 percent sales tax to build FasTracks, which includes six new train lines and extensions to three existing light-rail routes.
Since then, the transit agency’s budget for FasTracks has been derailed by escalating construction costs and sharply downgraded long-term sales-tax-revenue forecasts.
Without a tax increase, RTD expects to only have enough money to build about half the FasTracks project by the end of this decade. The remaining lines might not be built until 2042.