Fairbanks Alaska investing - Best possible scenario

29 Replies

I was hoping to connect with someone who had experience investing in Fairbanks area and Alaska in general. Just browsing the listings, there is a huge variations in prices. It seems that most SFH, duplexes, and triplexes are in the $150,000-$300,000 range. Is there a certain sweet spot or investing strategy that seems to work in Alaska?

Prices are all over the place. Would appreciate any insight!

Hello Andrey.    I'm don't know much about the Fairbanks market but I'll reply anyway.  There might be some decent deals to be had because of the high energy costs in the area.  Which is another way of saying that you need to be aware of the high energy costs and plan for them in some way.   The traditional way is to pass them off to the tenant but I wouldn't be surprised if Fairbanks tenants are wary of that practice as a group.  Many tenants would appreciate is an energy efficient home.  The Cold Climate Housing Research Center is located in Fairbanks and they do some really cool stuff.

http://www.cchrc.org/

A house doesn't have to start out energy efficient in order to be energy efficient.  The second place I owned here in Anchorage I was able to bring from a 1+ star energy rating to a 4+ star rating.   State incentives helped with that but irrespective of the incentives the payoffs is evident every month in significant savings and I imagine that would be even greater in Fairbanks.

On a related note if a home is heated or has its hot water heated by a wood boiler I'd be hesitant because Fairbanks regularly exceeds Federal Clean Air Act standards in the winter due to all of the people burning wood.  Eventually this will have to end.....of course their could be some government incentives to switch to other fuels  

Got off on a bit of an energy and govn't incentives tangent there....Anyway, sorry I can't be of more help, just be aware of energy cost issues as one thing to learn about as you research Fairbanks....which is a eccentric but fun community in my opinion.  Many of the University people that one might want to rent to choose to live in super cheap "dry cabins".   Dry cabin culture, called "dry" because they have no running water, is a thing in of itself....awesome or horrifying depending on how attached a person is to modern comforts and conveniences.  There is a military presence but I'm not sure on the numbers of renters that come from that community. I have heard that the vacancy rate is quite a bit higher in Fairbanks than in Anchorage.  Anchorage has almost no vacancy though (2-3% at the moment).

Originally posted by @Brett Roth :

Hello Andrey.    I'm don't know much about the Fairbanks market but I'll reply anyway.  There might be some decent deals to be had because of the high energy costs in the area.  Which is another way of saying that you need to be aware of the high energy costs and plan for them in some way.   The traditional way is to pass them off to the tenant but I wouldn't be surprised if Fairbanks tenants are wary of that practice as a group.  Many tenants would appreciate is an energy efficient home.  The Cold Climate Housing Research Center is located in Fairbanks and they do some really cool stuff.

http://www.cchrc.org/

A house doesn't have to start out energy efficient in order to be energy efficient.  The second place I owned here in Anchorage I was able to bring from a 1+ star energy rating to a 4+ star rating.   State incentives helped with that but irrespective of the incentives the payoffs is evident every month in significant savings and I imagine that would be even greater in Fairbanks.

On a related note if a home is heated or has its hot water heated by a wood boiler I'd be hesitant because Fairbanks regularly exceeds Federal Clean Air Act standards in the winter due to all of the people burning wood.  Eventually this will have to end.....of course their could be some government incentives to switch to other fuels  

Got off on a bit of an energy and govn't incentives tangent there....Anyway, sorry I can't be of more help, just be aware of energy cost issues as one thing to learn about as you research Fairbanks....which is a eccentric but fun community in my opinion.  Many of the University people that one might want to rent to choose to live in super cheap "dry cabins".   Dry cabin culture, called "dry" because they have no running water, is a thing in of itself....awesome or horrifying depending on how attached a person is to modern comforts and conveniences.  There is a military presence but I'm not sure on the numbers of renters that come from that community. I have heard that the vacancy rate is quite a bit higher in Fairbanks than in Anchorage.  Anchorage has almost no vacancy though (2-3% at the moment).

 Thanks Brett! Gives me a lot to think about.

I wonder if grabbing a duplex or triplex in Anchorage and renting it out, then managing it from Fairbanks is the better solution? I will need to know the differences in the amount of rent I can charge for a given purchase price. Then I can just buy or rent a junky 1/1 in Fairbanks.

Someone that was stationed in Fairbanks mentioned a 10:1 male to female ratio in Alaska, and a 6:1 ratio in Fairbanks. Then I looked at the census data online, for 2014: 46% of people are women in Fairbanks area! I am inclined to believe the census data, but darn that is a huge difference.

Census data is correct. The rest is just old stereotypes. In my opinion your are better, at least in the near term, buying in Fairbanks and managing it yourself than trying to manage an Anchorage property from Fairbanks. Fairbanks is a long ways away (6-8 hours by car) and most likely you'd be needing a property manager in Anchorage. Did you say you are military? If this is your first investment property you might consider house hacking and trying to find some GI roommates. That could work out pretty sweet I'd think. Just be sure to buy right.

also, as you may know, there is some statewide budget uncertainty related  to oil prices... Some directly related to Fairbanks may include the university budget...for example, check the ADN and Daily News Miner right now for top stories on the UA system budget (UAF and statewide administration could lose jobs ).. Debate is ongoing and one to follow of younarebhoise shopping  (president even mention "more houses on the market" possible).. Best of luck

@Andrey Y. what is your method of investing? Are you looking to flip, buy and hold, or something like BRRR?

Originally posted by @Brett Roth :

Census data is correct. The rest is just old stereotypes. In my opinion your are better, at least in the near term, buying in Fairbanks and managing it yourself than trying to manage an Anchorage property from Fairbanks. Fairbanks is a long ways away (6-8 hours by car) and most likely you'd be needing a property manager in Anchorage. Did you say you are military? If this is your first investment property you might consider house hacking and trying to find some GI roommates. That could work out pretty sweet I'd think. Just be sure to buy right.

It won't be my first investment property. I have been investing (mostly B&H/passive stuff) in Hawaii over the last several years. The market seems to be all over the place. Also, I am undecided with SFH vs. duplex vs. Triplex etc. Would love to hear your thoughts or suggestions.

@Andrey Y. We purchased a duplex here in Fairbanks. The tenant side is a 2 bed 1 bath and it rents for $1525. Our side is a 3bed 2 bath and would rent for $1700-$1800.   I work with a great realtor here in town. PM for her info if you want it.

Other than suggesting house hacking which is similar to what it sounds like Shari is doing, I don't have any particular suggestions as to the type of property... It really depends on what fits best for you.

Originally posted by @Brett Roth :

Other than suggesting house hacking which is similar to what it sounds like Shari is doing, I don't have any particular suggestions as to the type of property... It really depends on what fits best for you.

 Okay, thanks! A quick search yielded a 17% vacancy rate in the Fairbanks area. Seems very high! Is that what you guys are tracking in your experience?

Originally posted by @Michael Boyer :

also, as you may know, there is some statewide budget uncertainty related  to oil prices... Some directly related to Fairbanks may include the university budget...for example, check the ADN and Daily News Miner right now for top stories on the UA system budget (UAF and statewide administration could lose jobs ).. Debate is ongoing and one to follow of younarebhoise shopping  (president even mention "more houses on the market" possible).. Best of luck

 Hi, could you expand on this some more? I am not familiar with any of the acronyms / terms you used

Sure, just read the Fairbanks news miner online and any of the most read stories on the University of Alaska and University of Alaska Fairbanks budget issues in the news a few times a week.. There are many up (and you get like 20 free I think)...Nice interview up now with the president of the university system....the anchorage paper (adn) also has some, stories....best of luck

@Andrey Y. What is your strategy? Are you looking to buy and hold, or flip?

Originally posted by @James Cash :

@Andrey Y.What is your strategy? Are you looking to buy and hold, or flip?

 I want to buy and hold at the very least (looking into a duplex or triplex scenario). Depending on my upcoming work schedule, I would also be interested in flipping. How has the flipping been there recently.. money to be made?

Shoot me an email. Anchorage - Matsu valley is my market, but I can run some reports and let you know, at least, what the most desirable markets are right now. 

If the inventory / days on market is low in a specific category, it will tell us there is a high turnover which means good for flips. 

Hi @Andrey Y. ,

Why anyone would move from Hawaii to Alaska is beyond me, but I'm an old guy and trying to do just the opposite. Anyhow, welcome to the North side of the pond!

For what it's worth (and I don't know how certain this is) but I just heard (in the last couple of days) that the Air Force is considering locating 2 Squadrons of F-35's in Fairbanks. If I remember right they're talking about 2,500 - 3,000 people. Could be a nice bump for the Fairbanks market and full disclosure: I know NOTHING about that neck of the woods.

Good Luck! and great investments to all.

Scott

Originally posted by @Scott Sewell :

Hi @Andrey Y.,

Why anyone would move from Hawaii to Alaska is beyond me, but I'm an old guy and trying to do just the opposite. Anyhow, welcome to the North side of the pond!

For what it's worth (and I don't know how certain this is) but I just heard (in the last couple of days) that the Air Force is considering locating 2 Squadrons of F-35's in Fairbanks. If I remember right they're talking about 2,500 - 3,000 people. Could be a nice bump for the Fairbanks market and full disclosure: I know NOTHING about that neck of the woods.

Good Luck! and great investments to all.

Scott

 Not my choice, but trust me, 5 years is PLENTY for Hawaii. Got to travel to the neighboring islands each 3-5 times, as well as 8-10 Asian countries, and pick up some profitable REIs.  Time for new challenges :)

Thanks for the welcome! If you were to live there (Fairbanks) for 2-3 years, do you think purchasing a duplex or triplex would be a wise choice (assuming you didn't mind living in one)? If i pick up a SFH I would have to live in a 3-4 bedroom on my own, and not get any cash flow at all.

@Andrey Y.

 I live in Bethel Alaska.  I researched the market in Fairbanks a couple years ago.  Most Landlords in Bush Alaska (Fairbanks is not really "Bush Alaska") keep the oil delivery in their name.  The reason is due to the extreme cold. if a tenant doesn't fill the tank the water/sewer lines will freeze.  You have NO IDEA how hard it is to thaw a frozen house at -40 YES I said 40 degrees below zero.  Fairbanks is a very cold place.  If you have propane it wont come out of the tank very well at -40 degrees.  Heating oil will also jell at very cold temps.  That being said Fairbanks sports a Lower housing price than anchorage, and a lower overall cost of living than Anchorage.

As to the economics Most Alaskans are predicting an economic slump due to low oil prices.  For more info search "weathering the storm in Alaska or any place else" right here on BP.  There is a thread on the coming sag in Alaska's economy. 

There is a military base 50 or so miles away in delta junction.  don't know if that affects the rental market in Fairbanks or not.  If I were going to buy rentals in Fair banks I would wait 6-8 months and see what the market is going to do. (after all the time to make money is when the blood is running in the streets right?)  I can tell you I am glad my rentals are out of state.  I work for the state of Alaska and they had so much trouble passing a budget last January they laid EVERY non essential employee off.  They finally passed a budget and didn't need to lay anybody off.  Originally the proposed budget was 2.5 BILLION short.  Things aren't much better here this year.  This is pretty critical to the states economy because the state owns and maintains all the airports, highways, and maintains ships and crews for the Alaskan marine highway.  The trickle down effect on the economy will be huge. 

In summary I would look long and hard at my ability to manage an investment long distance in an artic climate.  My second step would be to wait until prices fall before I bought anything.

RR    

Very interesting perspective on the cold weather. All of our houses but one is in areas that don't free, the other one is just slightly. It certainly makes long distance landlording much easier. 

@Elizabeth Colegrove  here in Bethel most every house has delivered water not piped in as the ground is frozen year around. That means each house has several hundred gallons of water stored inside the house somewhere. When they freeze up the tank splits.  Nothing happens till you warm it up and the tank thaws. Then there is water everywhere. I'd hate to be out of state for that mess. We even had the city over fill our tank and flood the utility room. Even the local landlords pull their hair out. A 2&1 750 square ft house sells for 190 k. Rents for $1700 a month. It's crazy. RR

@ralf those are crazy rents and purchase prices. sounds like there is expense and liability too!

Originally posted by @Ralph R. :

@Andrey Y.

 I live in Bethel Alaska.  I researched the market in Fairbanks a couple years ago.  Most Landlords in Bush Alaska (Fairbanks is not really "Bush Alaska") keep the oil delivery in their name.  The reason is due to the extreme cold. if a tenant doesn't fill the tank the water/sewer lines will freeze.  You have NO IDEA how hard it is to thaw a frozen house at -40 YES I said 40 degrees below zero.  Fairbanks is a very cold place.  If you have propane it wont come out of the tank very well at -40 degrees.  Heating oil will also jell at very cold temps.  That being said Fairbanks sports a Lower housing price than anchorage, and a lower overall cost of living than Anchorage.

As to the economics Most Alaskans are predicting an economic slump due to low oil prices.  For more info search "weathering the storm in Alaska or any place else" right here on BP.  There is a thread on the coming sag in Alaska's economy. 

There is a military base 50 or so miles away in delta junction.  don't know if that affects the rental market in Fairbanks or not.  If I were going to buy rentals in Fair banks I would wait 6-8 months and see what the market is going to do. (after all the time to make money is when the blood is running in the streets right?)  I can tell you I am glad my rentals are out of state.  I work for the state of Alaska and they had so much trouble passing a budget last January they laid EVERY non essential employee off.  They finally passed a budget and didn't need to lay anybody off.  Originally the proposed budget was 2.5 BILLION short.  Things aren't much better here this year.  This is pretty critical to the states economy because the state owns and maintains all the airports, highways, and maintains ships and crews for the Alaskan marine highway.  The trickle down effect on the economy will be huge. 

In summary I would look long and hard at my ability to manage an investment long distance in an artic climate.  My second step would be to wait until prices fall before I bought anything.

RR    

From what I have read, and talked to a local realtor, there has been very little appreciation since 2008. Do you think there is a good chance that prices will fall in the near future? If so, how long would you wait?

I would hate to rent for 2-3 years, but I guess I would save a lot of housing cash that way. The realtor I talked to said that many of her past clients hired a property manager and moved away from the state. I wonder if this will be feasible.

@Andrey Y. I don't think you would have to wait 2 to3 yrs to see the economic trends. I'm no expert though.   The state did a cost of living survey 8 yrs ago   Remember housing expenses are about a 1/3 or so of your cost of living. Fairbanks had at that time a lower cost of living than anchorage. Mostly due to housing cost.  I don't know why tho.  Managing a property while living there probably wouldn't be too bad. Living there a while would give you some chance at finding a good PM.  I wouldn't recommend trying it without a PM tho.  RR

Hi  @Andrey Y. I'm here in Fairbanks.  Feel free to PM  

Many of the interesting things about Fairbanks have already been discussed.  A couple of clarifications from my perspective though:

The military here is a huge component of the town. We have 2 bases--- One Army (Ft. Wainwright) and one Airforce (Eielson.)  There is also North Pole, which is essentially Fairbanks but some people count it as a separate area.  Unlike some other places, it is very unlikely that the bases will close or downsize.  We are in a very good position geographically and there are specific training that can only occur in our cold environment.

As far as prices, it does vary widely--- There are some areas that are better than others but for me the rental market here makes a lot of sense. I bought a SFH and lived in it while renovating and was able to do the BRR method. It was a foreclosure and the heating system had frozen up so I had to replace all of that. Yes, it was a large expense but I budgeted for it and the numbers still made sense. I converted the basement into a unit and currently have a renter covering most of the mortgage while I live upstairs. When I leave, the house will cash flow well even with me covering the oil/heat. I'm not counting on appreciation. It's a cash flow thing and if you find the right house I think it's good to be a landlord here.

I'm not sure where you are getting the lower cost of living--- Alaska prices are higher than the lower 48 because everything has to be shipped up here and the heating costs are much higher than the rest of the country.  

Good Luck to you.

My wife and I bought another house in Fairbanks/North Pole area. North Pole is between two military bases (Eielson AFB, and Ft. Wainwright Army Base). We purchased a SFR with a MIL suite that was easily partitioned off to make a 1/1. The mortgage on the property is just under $1,800/mo. The 1/1 rents out at $1,000/mo, with heat, water (well water), and electric included...no washer/dryer hookups in unit, and no covered parking. The property will be interesting to manage long distance (no separate utilities), and rental property managers are dropping like flies up here for some reason. There is pretty much only one game in town, and they charge way too much IMO. There are many reasons for the price disparities, everything from location (the hills are usually a few degrees warmer year-round, and above the ice fog), neighbors (typically a Sanford and Sons type hoarding houses randomly about....so nice houses go up next to what looks like a junkyard), no real building codes, so pretty much anything goes, etc. If you'd like to talk some more about it, or have some specific questions, please feel free to hit me up!! Oh yeah, for comparison, the house we bought up here listed at $300K....in the lower 48 it would likely list at about $190K-$215K...however, I'd wager you're already used to island prices, lol!

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