Spokane-area homes arent the only residential properties here that are selling like hotcakes these days.


Commercial real estate agents who specialize in multifamily properties say apartment complexes are selling more briskly than they have in 10 years.


Mitch Swenson, a real estate agent with Tomlinson Black Commercial Inc., of Spokane, says sales activity and inquiries from potential buyers of such properties have doubled during the last year.


The action has just been phenomenal, he says.


Like residential real estate agents, apartment specialists attribute the increased activity to historically low interest rates. Swenson says loan rates for such investments have fallen well below 6 percent at times. One investor, he says, recently secured a rate of 5.65 percent on a 30-year fixed-rate loan to buy an apartment complex.


That might be higher than current home mortgage rates, but is unheard of for an investment-property loan, he says.


Unlike their contemporaries in the single-family housing market, agents in the multifamily market say that for the most part, out-of-town buyers are fueling the surge in activity.


Earlier this month, a San Francisco-based investment group bought for $3.5 million two 20-some-year-old apartment complexes here with a total of 123 living units. Those properties include the Riverton East Apartments, in East Spokane, and the 32 Pines Apartments, in Spokane Valley.


Also recently, the California-based Zalud Family Trust acquired two older complexesthe 86-unit Valley Green Apartments in Spokane Valley and the 90-unit Garden Manor Apartments in Cheneyfor a total of $5.8 million.


A member of the Zalud family has said the trust plans to acquire more multifamily properties here.


Jim Watson, an agent with the Spokane real estate concern Kiemle & Hagood Co., says he has sold several apartment properties to buyers from the Puget Sound area and Portland.


Swenson says he also has handled transactions involving buyers from as far away as Alaska and Hawaii.


Of course, Spokane-area investors account for some of the activity. Earlier this year, Patrick H. Kofmehl, of Spokane, bought for $2.4 million the 91-unit La Villa Riviera Apartments in East Spokane. Kofmehl, a contractor, plans to start a $600,000 remodeling project there later this year.


Last year, Kofmehl sold the 123-unit El Estero Apartments, also in East Spokane, to a company formed by nonprofit affordable-housing provider Spokane Housing Ventures.


Both Swenson and Watson say Spokanes apartment market is hot right now partly because many multifamily properties here will sell at prices that generate whats known as a high annual capitalization rate. Capitalization rate is a propertys annual net income divided by its total cost, and is a common indicator of a propertys potential return on investment.


Swenson and Watson both say the average capitalization rate in the apartment-investment market here is about 8.5 percent, which they say is 2 to 3 percentage points higher than it is in Seattle, Portland, and other metropolitan areas.


The current mix of low interest rates and high capitalization rates makes multifamily properties here very attractive, they say.


This is a very unusual situation, Watson says. Typically, the interest rate and capitalization rate have been the same, or the interest rate has been higher.


Capitalization rates are relatively high here mostly because the prices sellers get for multifamily properties is low relative to other markets, Watson says.


Though net incomes from such properties here are generally low because average rental rates have remained flat, the low cost of buying properties boosts the capitalization rate. Rental rates have inched upward recently, but not significantly, he says.


In areas such as Seattle, Swenson says, real estate investors can stomach lower capitalization rates because they know that rents rise consistently there, and the properties they buy will provide higher profits within two or three years.


If interest rates start climbing, apartment rents in the Spokane market also will have to grow to keep investment activity in multifamily properties brisk, Watson says.


The fear that interest rates will rise and rents will remain flat is spurring owners to put properties on the market, allowing supply to keep up with demand, he says.


Buyers, meanwhile, also like the fact that vacancy rates here have remained relatively low, at between 5 percent and 6 percent for the last three years or so, Swenson says.


That means buyers typically dont have to worry much about having living units stay empty for extended periods.


Those consistently low vacancy rates, he says, also make owners feel more comfortable about putting additional money into their properties in minor upgrades to living units and exterior cosmetic improvements. Such investments, he says, are aimed at being able to command higher rents, and thus reap greater profits.