Real Estate Broker · Anchorage, AK · Member since 2015 · 170 posts · 46 votes
I just wanted to open up this discussion and see how everyone feels in the Anchorage, AK community of Real Estate here on BP.
It seems to me that a lot of people in the lower 48 feel a shift coming in the RE economy. Prices are reaching an all time high in Anchorage, sort of reminiscent of the '06 era.
I have my own thoughts as to how the economy will be shifting, but what do you guys and gals think?
Problem Solver / Investor · Anchorage, AK · Member since 2012 · 118 posts · 34 votes
10y
Hi James and Vincent! I'm currently boots on the ground in Wasilla and Palmer area, and after working in Anchorage, definitely seeing more opportunity in the Valley but in the realm that James Cash is mentioning. Currently finishing a fix/flip that was a HUD foreclosure, bought at $210k, tax assessed at $350k. Also control another property that my crew is using as a staging house, since most of my guys are from Anchorage and helps keep the driving and travel expenses down, that was a pre-foreclosure home. I'm looking at a commercial property that is willing to be owner financed because in its current shape it won't meet traditional financing for normal buyers, I'm closing on a 6-plex in the next week that cash flows crazy but has major septic issues. And has scared off most other people. Making it possible to get a tax assessed $525k property at $320k. Also currently have two other leads, one is pre-foreclosure and the other needs repairs due to not qualifying for traditional financing.
i guess what I'm saying is that there is a lot of potential out there, but you can't use traditional methods to find it or make it yield the type of returns your really looking for.
@Vincent Calderone Welcome to BP! This is an awesome community for like minded individuals.
I always tell new to investing clients that the right time to buy for you is the right time to buy. No one can time the market...almost no one. Typically, if everything is saying the same thing, the market doesn't tend to shift that way.
That said, I might not go new construction in the valley right now, but might go on the fixer upper side of things. This leaves some value-add investing for you, and wiggle room on rents and equity so you're not strapped if the economy does take a turn. The best thing you can do is prepare yourself for the worst case scenario.
Rental Property Investor · Soldotna, AK · Member since 2014 · 73 posts · 28 votes
11y
I do not know the Anchorage market well, but we seem to be seeing the same thing in the Kenai & Soldotna areas. Prices are high, especially on 2-4 unit buildings. I am not sure if it is because of a shift as those down south are stating or if we are just growing. Our area is seeing a lack of housing because of oilfield related work in the area. If the LNG plant is built in Nikiski it will definitely be a game changer. What are your thoughts?
Real Estate Broker · Anchorage, AK · Member since 2015 · 170 posts · 46 votes
11y
I think we are a unique market that is separate from the rest of the states.
Multi-family units are a very hot commodity right now, and going for top dollar. This is due to the rental market being so hot, and vacancy being so low. Unless we have a mass exodus of people, I don't see this changing anytime soon.
There are a lot of variable factors that go into population growth and reduction, beyond just the price of oil as it trades (as some would have you believe). Due to the complexity of these issues, it is hard to say how our real estate economy will perform (the changing of hands of property). In my view, when there is opportunity, there are deals, and real estate changes hands. I believe there is still a lot of opportunity in Alaska right now, and in Anchorage.
As long as renters need renting, and opportunity of decent paying wages are present, we should continue to be fine.
Problem Solver / Investor · Anchorage, AK · Member since 2012 · 118 posts · 34 votes
11y
I think if you buy correctly, then it's a good market. I believe we are going to see some turmoil in the near future as oil, world economy, and marihuana laws shake out. Hard to predict if it will be good or bad. I think there could be some realignment but Alaska has such a buffered economy that events outside have diminished impact on us. It's the local impact that really hurts. Either way, there is always opportunity, just different strategies necessary to make them work for you.
Anchorage, AK · Member since 2015 · 83 posts · 27 votes
11y
I'm new and haven't bought a property yet but I've just been sitting looking at the inventory and rentals are indeed a hot commodity but it doesn't seem like house flipping is really good for our market... Maybe I haven't seen enough or done nearly enough but I see a lot of really nice renovated houses just sitting on the market. But one thing I have also noticed is the single family home rental market inventory is very low as well. Any thoughts?
Problem Solver / Investor · Anchorage, AK · Member since 2012 · 118 posts · 34 votes
11y
@Princeton Washington depends on the price point of the homes and the amount of remodelling done. Sometimes homes get over remodeled, so the budget is higher which causes the selling price to start higher and stay on the market longer. If it's price competitively, and especially in the $200-325k range, then it typically will move pretty quick.
man you're right I barely have been seeing anything in the 250-300k range it's like that range don't exist here lol! But I've been seeing a lot of houses sitting in the 400-600k range but I'm still new and learning the market. It's interesting!
Real Estate Broker · Anchorage, AK · Member since 2015 · 170 posts · 46 votes
11y
@Princeton Washington Roy is correct. You have to target flips on where the demographic of high inventory turnover is. Also, if you take a look at some flips people are not putting money not where it belongs and/or their projects come out weird or cheap looking.
Investor · Anchorage AK and Hampton, VA · Member since 2012 · 140 posts · 82 votes
11y
Hi Guys! Got to chime in on this one.
Now that you've addressed flipping, I'm wondering about the multi-family market, specifically the commercial portion (5+ units). The residential portion (IMO) is insane unless you plan to owner occupy with minimal down. Roy has heard my rant on this before so, sorry @Roy Schauer, here I go again.
As you said @James Cash, the multi market is hot, and has been for two years. I'm seeing prices on good 2BR units pushing 100K per unit. And when rents of that same unit are at $12-1300 per month, if you apply the 50% rule (mandatory, from our experience) and 20% down, how are the buyers of these properties generating ANY return on their investment? I've heard people say (usually realtors) that rents will just have to go up, but the market is telling us just the opposite, it's gotten much more competitive and rents have actually gone down slightly. Incomes have not gone up, and with the current uncertainty, i don't see that happening anytime soon.
Investor · Anchorage AK and Hampton, VA · Member since 2012 · 140 posts · 82 votes
11y
Thanks for the thoughts, @James Cash, have done (& doing) that as we speak.
I am more interested in the drivers behind the upward push in sales/price/demand, seemingly beyond intrinsic value.
So would you agree that some (a lot?) of the properties selling (and recently sold) at market value now could be in trouble with a downturn in our local economy? IE: oil prices stay low for a few years, state slashes its budget drastically (like in '86), etc?
Also, don't quite understand what you mean by "get it below market by adding value". Can you elucidate?
Real Estate Broker · Anchorage, AK · Member since 2015 · 170 posts · 46 votes
11y
I think any property bought at the top of a bell curve will be endangered on the downturn of an economy. However, trying to time a market is like trying to bottle lightning.
Alaska is a much more diverse economy than in 86, when oil was the only thing that attracted people here. It is hard to say where we are going for sure.
I personally have my own opinions and think (unless the global economy crashes) Alaska will be fine for at least a few years, and we are the San Francisco of the early 90's (on an upward climb for years).
Value add investing is identifying properties that are under performing due to poor management. This could mean rents are under market value, property is in rough condition, utilities can be sub-divided ect.
Not all people who own properties are in the know of their investments worth.
Problem Solver / Investor · Anchorage, AK · Member since 2012 · 118 posts · 34 votes
11y
@Scott Sewell I agree that the multi-family's bought in the past 3-4 years, if they paid full market value, set themselves up for failure. If they have any sort of major problem, ie bad tenant, furnace failure, foundation leak etc...then it opens up an opportunity for my business as it burns through their reserves to fix the money hemorrhage as their properties barely build those reserves up before the next fun run in the wonderful world of mult-family.
Investor · Wasilla Alaska · Member since 2014 · 123 posts · 55 votes
11y
I tried to enter this market and backed off because of exactly what you guys are saying here. Trying to find deals from a distance proved to hard. I decided to wait until I move up there then get to know my way around better. Defiantly a hot market, wow. Any insight on expense ratios for multi family in anchorage? It looked like to me it was around 60% ??
I would agree with your strategy. We're interested in investing in other areas as well, but without "boots on the ground" that we trust and have some confidence in their abilities to discern an opportunity, have not gone much further than watching the market via MLS and other online services to educate ourselves.
As to the expense ratios here, as I said earlier, for us the 50% rule is a mandatory screening filter. This is of course somewhat variable depending on the age and condition of the property. After the mortgage, heating is the largest expense (and an accepted provision for landlords in our market) so energy upgrades become a great way to add value as @James Cash said, at least in multi's. With SFR's, tenants providing their own utilities is the norm, but we've seen few opportunities for cash flow in the SFR market.
@James Cash, so "get it below market by adding value" maybe should have been: "get it below market AND adding value" instead? So (IE: the San Francisco analogy) do you believe the current market will continue? Do you believe sales/prices/demand will continue to appreciate despite the downturn in oil prices and the decreased revenue to the state? How about you @Roy Schauer? @Kassandra T., what are your thoughts?
Real Estate Broker · Anchorage, AK · Member since 2015 · 170 posts · 46 votes
11y
@Scott Sewell is right about the ratios, and thanks for keeping us on track!
I did mean either getting below market, adding value...either one or both, whatever makes the numbers make sense.
I think if trends go, we won't see a huge effect on our economy for another year. I think come February, we will know a lot more about the shifts in our market. Oil will not stay as low as it is right now for a long period of time, it will rebound.
Investor · Anchorage, AK · Member since 2013 · 229 posts · 133 votes
11y
In the engineering services sector - I can say from day job the business is quite good. As far as the local RE economy - I think this ADN article still applies - http://www.adn.com/article/20150322/home-ownership-dreams-deferred and this one http://www.adn.com/article/20140308/anchorage-doesnt-have-enough-homes-meet-demand. The main struggle here is that many people of my generation cannot afford the market here in Anchorage. This leaves them either renting or picking up roots and moving somewhere else. Rents have definitely kept up with the market due to high demand. A year and a half ago - 3-2 duplex units were comping at $1700. Now I'm seeing comparative rents at $1850. That's about 6% annualized growth. The purchase price growth has also been about 6% over the same period. Definitely not sustainable if we use the long term average of 4% appreciation (nationally).
I'd read those earlier this year but forgot about them. And I think you're right about the higher end rentals ($1750+?) in neighborhoods where everyone wants to live, but we're not seeing that (actually the opposite) in the mid range stuff. I too, wonder about the sustainability. With multi-family and SFR at all time highs for pricing, new construction only making sense for an owner occupied duplex market, and raw land having no relationship to development costs, (not to mention the oil price/state revenue decline) I'm feeling we're at the top of the bell curve.
Katy, TX · Member since 2014 · 134 posts · 18 votes
11y
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