what do you think about investing in multifamily in Idaho?
Dolf Al EmaraPro Member
Real Estate Broker · Los Angeles, CA · Member since 2020 · 42 posts · 6 votesHi investors,
I am an investor from California and would like to invest out of state for the first time in my life. I am familiar with SF bay area and LA area markets. however, I know little bit about Nampa, Eagle, Boise, and Mountain Home areas in Idaho. they look good on papers, but what should I be looking for as a market research before committing to buying? I am starting with buying a FourPlex in Either Nampa or Mountain Home.
for the seasoned, out of state investors, what things I need to look for before buying to avoid surprises in the future? my main concern is, I want to gain little bit on all four aspects of RE profits, i.e. appreciation, cash flow, loan pay down and tax.
the other concern, I see there are plenty of subdivision under construction in the Nampa area and rapid price increase in properties. should I still buy in Nampa before it's too late and capture some appreciation? or just buy in Mountain Home (not much building going on, not sure about appreciation there)?
Nampa population 2020: 96,000.
Mountain Home population: 16,000.
I am all ears.
cheers!
Dolf
Hey @Dolf Al Emara,
I have been a resident of this area for 10+ years, and own 1 rental property here in Boise. Please take what I say with a grain of salt as I would strongly encourage you to reach out to individuals who have kept an eye on this market for years (@Jim Paulson, @Shannon Robnett).
On paper Mountain Home I believe is part of the Boise MSA but I personally would not consider it. You probably see that it is only a 40 minute drive to Boise, which in some parts of the country might seem like a suburb of the city but here it is not. Even with our rapid growth you can still find an affordable living situation a lot closer to where the jobs are in Boise/Meridian/Nampa. Although the projections say our growth will sprawl that direction towards Mountain Home, we are not there yet. So what I am saying is that if you are going to invest in Mountain Home I would become familiar with their economy which is primarily based around Mountain Home Air Force base, and be comfortable with the returns you get from this area while our 'sprawl" from Boise to Mountain Home is still a few years/decade out. I would encourage you to look more towards Nampa/Caldwell if appreciation is your goal.
If anyone has an opposing point of view I would like to hear it, as I myself would like to be continually educated on our area.
Sean
1. Call the building department in the town & ask them if there are additional requirements that you need to meet for a 4 family. 4 family is typically the line of demarcation for commercial property; commercial has different requirements & standards that add some cost to ownership.
2. I recommend reaching out to an Agent & getting a report on sales for comparable properties over the last 90 days and rents as well.
3. Out of state investing is all about understanding the immediate area to your investment. Make sure you are looking at comps within a half mile (even if you have to go as far back as 18 months); property value in the neighborhood is the most important thing.
1. Call the building department in the town & ask them if there are additional requirements that you need to meet for a 4 family. 4 family is typically the line of demarcation for commercial property; commercial has different requirements & standards that add some cost to ownership.
2. I recommend reaching out to an Agent & getting a report on sales for comparable properties over the last 90 days and rents as well.
3. Out of state investing is all about understanding the immediate area to your investment. Make sure you are looking at comps within a half mile (even if you have to go as far back as 18 months); property value in the neighborhood is the most important thing.
1. not sure why I need to call department. do you think the city will not allow me to buy in their city? I doubt it.
2. I have sales comp for last year to date for Mountain Home city. the price I got for the 4-plex building is good and below market by 5% or so.
3. I already did that. I want more info on that regard. do I need to look for employment numbers? is city population is key? how can I look at a city as a full picture, not only few cosmetic things like comps.
the main question is, and I repeat. should I buy in Nampa? or in Mountain Home? and why?
thanks for the reply.
Dolf
Hey Dolf,
Appreciation is here in the treasure valley, in Nampa there was 6.2% increase for 2019. Depending on what you get the duplex for and rent value, it could be there for cash flow as well. I can look into that if you are interested. Mountain Home is good idea as well for buy and hold. There is an Air Force base there and that will help with having people coming in and out of the area looking for places to rent.
I just bought out an investment property out of state. I have found the best thing is to have a great responsive team (a realtor, contractor, and property management company) that understands the numbers you need for making you money.
Hope this helps. Feel free to reach out and I can do a CMA and rent prices for the area you are interested in.
Annie
Dolf,
I think either location is good, but if I were to choose I would go with Nampa. They have an Amazon warehouse being built near there that will bring steady jobs into the area. It is an up and coming city.
Hi Dolf!
I spent pretty much all last weekend with the BP calculators trying to figure out how to make the new construction in Nampa make sense... and for me it just doesn't. I wouldn't mind banking on appreciation under normal circumstances (without the uncertainty of Covid), as long as I still have some cash flow, but most of these calculated negative.
I'm still new to the game and learning, but just thought I would share :).
Hi Dolf!
I spent pretty much all last weekend with the BP calculators trying to figure out how to make the new construction in Nampa make sense... and for me it just doesn't. I wouldn't mind banking on appreciation under normal circumstances (without the uncertainty of Covid), as long as I still have some cash flow, but most of these calculated negative.
I'm still new to the game and learning, but just thought I would share :).
Hi Trina,
I am in the same boat as you. I feel like, the more buildings in the space, the less prices should be. here is the catch: I talked to Agents and property mgmt from the treasure valley area, and they all said that the inrush of people moving to Nampa made it still appealing to investors to buy pricy multifamily buildings.
to me personally, unless I see the numbers make sense with my projections, I would not buy just because everybody is buying. this is not my mentality as an investor.
cheers!
Dolf
Dolf,
I think either location is good, but if I were to choose I would go with Nampa. They have an Amazon warehouse being built near there that will bring steady jobs into the area. It is an up and coming city.
Hi Annie,
I have not yet seen any property that numbers make sense. If I see, I would definitely buy it.
cheers and thanks for the comments.
Dolf
You bet.
1. Calling the building department will tell you how the building is designated and will predicate your CapEx.
2. Markets shift continuously, a value from last year is not relevant
3. Real estate follows macro trends generally, but in my experience asset value is 90% based on the neighborhood.
In short, I understand that you are looking for an answer that is derived from underlying demographic information but I am telling you that looking at it that way is incorrect. Make the purchase based on what is going on in the neighborhood over the last 90 to 180 days, looking at it any other way leads to a value that will likely be out of line.
As an example, my partner represented a home owner in Cambridge, MA; an A market with excellent underlying demo trends, high median income, high median prices etc. Cambridge has every positive metric you can ever imagine. He listed the property for $435/sq foot, the market at that time for comparable properties was $475/sq foot (he listed at a discount intentionally in order to drive Buyer interest). The property eventually sold for $415/sq foot even though a comparable property a quarter of a mile a way sold for $495/sq foot. What accounts for this discrepancy? The property happened to be on the 'lesser' side of that particular street, and there were factors that he failed to take into account that were known to Buyers in the market and those Buyers acted accordingly.
Dolf and Trina,
Have you guys looked at participating int a syndication in the area? With syndications you guys get to be a part of a bigger party and while it takes away a bit of the drive your own ship independence, it also puts you in partnership with some experienced market players. And while you might struggle with making some of the numbers for these markets make sense with an experienced syndicator you can look at the way they are positioned in the market to uniquely take advantage of income opportunities.
Its definitely a way to win in a hot market!
I live in Los Angeles and purchased 10 single-family homes in Meridian and Boise Idaho in the past 15 years. I flew to Boise several time specifically to look at apartment buildings and never saw a property that made investment dollar sense.
While the rental units were a little less expensive than in California, the problem with every Idaho property is the rents are too low to cover the costs for maintenance. Since there is so much vacant land and new construction the appreciation is low. The weather gets fairly cold in the winter and when the temperature drops to 5 degrees and a furnace goes on the blink expect to pay 200% more than the average cost for a repair, or pay for water damage caused by frozen water pipes. That is just about what the heating contractors tell me when I have a furnace problem.
I have several rental properties in 4 states and I am currently dumping every distant property. Investing in rentals out-of-state is great only if the properties appreciate, significantly. Otherwise, it is very difficult to turn a profit if you think you are going to make money purely by renting and cash flowing a few hundred dollars on each property every month.
Even though California has the highest costs for real estate California is still one of the best places to invest. You only need to be patient like as an alligator to get a great investment for a wholesale price.
Y
Jack what are you looking for with specific ROI targets and COC for your investments? Have you thought about looking at brand new for all of the reasons you stated?
I live in Los Angeles and purchased 10 single-family homes in Meridian and Boise Idaho in the past 15 years. I flew to Boise several time specifically to look at apartment buildings and never saw a property that made investment dollar sense.
While the rental units were a little less expensive than in California, the problem with every Idaho property is the rents are too low to cover the costs for maintenance. Since there is so much vacant land and new construction the appreciation is low. The weather gets fairly cold in the winter and when the temperature drops to 5 degrees and a furnace goes on the blink expect to pay 200% more than the average cost for a repair, or pay for water damage caused by frozen water pipes. That is just about what the heating contractors tell me when I have a furnace problem.
I have several rental properties in 4 states and I am currently dumping every distant property. Investing in rentals out-of-state is great only if the properties appreciate, significantly. Otherwise, it is very difficult to turn a profit if you think you are going to make money purely by renting and cash flowing a few hundred dollars on each property every month.
Even though California has the highest costs for real estate California is still one of the best places to invest. You only need to be patient like as an alligator to get a great investment for a wholesale price.
Y
You nailed it, Jack!
@Account Closed rental prices have been rising a lot in Boise and the immediate area. With the low interest rates and increased rentals that should offset some of the cash flow issues you stated. Also, if you still have any properties here and need HVAC work, I have a friend that is very fair in his prices and doesn't gouge people during peak seasons.
@Jim Paulson
Jim and all,
Boise and Idaho in general has been on my radar for some time. While I haven't executed anyting there yet I have done so in other markets.
On the surface there appear to be many great things going on for the city and state overall in terms of population growth and still over from California to Seattle and Portland.
*** what I have found difficult to understand investing in Boise however is if the overall fundamentals are there, and not just because it's a more affordable place, more land, more nature. Ie economics, job growth (non-SIP related). Utah where I've Invested on the other hand has presented better value, appreciation, ROI, growth.
In all honesty, I'm still interested and will visit soon. Wondering if any other investors have gotten over this specific hurdle I'm experiencing with Boise/ID. Thx in advance.
Andy C.
Hey @Dolf Al Emara,
I have been a resident of this area for 10+ years, and own 1 rental property here in Boise. Please take what I say with a grain of salt as I would strongly encourage you to reach out to individuals who have kept an eye on this market for years (@Jim Paulson, @Shannon Robnett).
On paper Mountain Home I believe is part of the Boise MSA but I personally would not consider it. You probably see that it is only a 40 minute drive to Boise, which in some parts of the country might seem like a suburb of the city but here it is not. Even with our rapid growth you can still find an affordable living situation a lot closer to where the jobs are in Boise/Meridian/Nampa. Although the projections say our growth will sprawl that direction towards Mountain Home, we are not there yet. So what I am saying is that if you are going to invest in Mountain Home I would become familiar with their economy which is primarily based around Mountain Home Air Force base, and be comfortable with the returns you get from this area while our 'sprawl" from Boise to Mountain Home is still a few years/decade out. I would encourage you to look more towards Nampa/Caldwell if appreciation is your goal.
If anyone has an opposing point of view I would like to hear it, as I myself would like to be continually educated on our area.
Sean
Great idea 3 years ago (I had a place in contract and my buyer walked), OK idea now.
Stuff has really inflated there. Too bad, that buyer calls now and wants deals in ID badly.
Boise is an awesome market to invest in but I think out where I am at in East Idaho is really overlooked. The economy is super diverse, with lots of government jobs, prices are more affordable, cap rates are higher and demand is far out pacing supply. If anyone is looking to invest in Idaho but isn't finding what they want in Boise, reach out to me and I can help you find something with awesome returns here in East Idaho! We also have a super strong investor network here (See The Idaho REIA https://www.facebook.com/idahoreia) and you will get way more bang for your buck than you will in these larger markets. Happy investing!
Dolf,
I don't want to say it's too late to get in, but as others here have suggested 2-3 years ago you'd have seen much better cap rates and yields given the rapid price escalations there. This is a dynamic not exclusive to just the Boise metro as others have also seen it. Fundamentals and growth are strong in Boise area, but just know cash flows won't look as strong and you may be banking more on growth/appreciation.
@Sean Thompson I agree with everything you stated about Mountain Home. Although it is only about a 40 minute commute from Mountain Home to the Boise Airport, about all there is in between are a few truck stops and lots of sage brush.
@Dan Rowley while cap rate has seen some compression its no worse here that elsewhere in the hottest markets in the nation. We still consistently see 10%+ COC and irr's over 20% on every thing we do. Of course 40 years in the market and 25 years as a builder developer helps with that.