SFR devalued after new Apartment complex comes up?

Question

I just got the notification from the city that there is a new apartment complex that will come up right in front of my house. It will be a brand new construction as it is vacant land right now. We are wondering if the property price for my SFR will go down once the construction is complete as I have never been in this situation before. If so, should I be thinking about get rid of the property right away before the construction starts?

Tim Swierczek · Answer

@Lynn Gupt I've worked in lending for 22 years. I've never seen an appraisal list an apartment building nearby as a reason for a lower value or as a negative price. Gas stations on the other hand do affect value.  I think many buyers will not want the extra traffic and noise they feel comes with an apartment and that will likely affect marketability. Could that keep you out of multiple offers or force you to accept a lower offer to sell? Yes, possibly but if the vacant land looks bad it could help you slightly. Most newly built apartments are nice and may give you a minor boost in appeal for your block. It's hard to say but I think it's fair to say your value is not tanking because of this apartment, any movement in value is likely to be small enough to be negligible.

Ko Kashiwagi · Answer

It's really hard to say without more info. It can be a negative factor if there's increased traffic/noise or if it blocks off a view. It can also be a positive factor - possibly an improved infrastructure as it may bring better roads, parks and retail options. It can also be a. sign of economic growth.

As long as there's no clear negative factor, it probably won't change much or could even be positive. New developments happen because there's potential in the area a lot of times.

Account Closed · Answer

Hi @Lynn Gupt, just echoing Ko's input above, as well as offering my perspective from a multifamily development point of view.  Without knowing more details about the specifics of the project being proposed as it relates to your property, it's hard to say if there are any obvious big red flags that could negatively impact your property's future value.

That being said, I would try to find out as much information as possible about the new apartment building's design and layout - the two big things I would try to ascertain would be the location of the garage entrances/exits, as well as the location of any outdoor amenity spaces (pools, terraces, dog runs, etc).  Just to give you an example of the type of thing you'd be potentially looking out for, if the community has a pool terrace planned and it's orientation in the new building would face directly towards your property, that could be a source of significant noise and disturbance for you/your tenants, and could make it much harder to sell your property once the new building is built and occupied.

On the positive side, new apartment buildings cost millions of dollars to develop and build, and developers really only sink that much money into areas where they're forecasting rent growth and property appreciation for their investment.  This would generally bode well for surrounding property owners as well.

One other thing I would also try to scope out in the new building's planning docs would be whether or not they are including any retail/commercial space in addition to the residential apartments.  A brand new building with commercial space on the first floor could mean new restaurants, shops, and businesses for the neighborhood, all of which would mean the area would become a more desirable area to live, and your property price would likely benefit as a result.  It's amazing what one high-quality restaurant can do to uplift the rest of the surrounding neighborhood.

For what it's worth, anyone investing Minnesota should be aware of The Development Tracker - this publicly available resource shares great development information about proposed, planned, in-progress, and recently completed commercial and residential projects around Minneapolis, St. Paul, and Duluth, MN, as well as the greater Twin Cities metro area and Rochester.  Their instagram account also does some great AMA-style development forums each week - definitely worth a follow for anyone who wants to see the latest and greatest in MN development info!

SFR devalued after new Apartment complex comes up?

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