SFR in Alaska Fairbanks, North Pole, Anchorage
Eielson Afb, AK · Member since 2017 · 19 posts · 1 vote
Hello everyone, I'm about to invest in a SFR in North Pole AK near FBX. I ran the numbers and it works out if I include the utilities but doesn't leave much meat on the bone. I was wondering if anyone has any suggestions as far as including the utilities or what's customary in this area? Thanks!
@Andrey Y. @Erik Nos my properties are all out of state. Some 10 years old some less than a year. I was trying to point out the market is very local. As an investor it's easy to over analyze. You must look at the whole Forrest not just one or 2 trees. I see posts on here where people try to analyze every detail to the last penny. Or try to do every bit of DD according to some set of specific rules they read some place. Sometimes you have to use common sense. Most people will tell you the market in alaska (at least on the road system) is poised to fall. This is what I think Erik is alluding to. Common sense tells me it's poor management to purchase before the market falls as opposed to waiting until after it falls. If you are looking off the road system this may not be the case. If you will remember I told you when we spoke before (9 or 10 months?? Ago??)that FBX has the cheapest housing in the state or at least close to it. Do you see why now?? I also recall telling you it would be difficult at best to manage these properties from out of state. Now I'm saying a purchase in anchorage or in the valley could drop in value drastically as well as associated rents. Couple that with some high leverage low down PMT financing and you have a recipe for disaster. FBX at least has some chance as the primary income there is federal money. The population is transient (military and colledge). I would guess that COULD (no guarantees) create a better rental environment. Many of the slopers, oil field techs, and construction people living in anchorage and the valley have and will continue to see jobs declining. That part of the Forrest is unhealthy timber in my eyes RR
Can you tell me what type of numbers you're working with?
As far as meat on the bones, are you talking equity, cap rate, roi, etc. ?
@Adrian Fajardo @Osmany Linares Osmany. My friend Adrian is looking in FBX as well he's on BP and in the service as well. You might give him a shout. I've tagged him here so maybe you 2 can connect. RR
@Ralph R. Thank you Ralph. You're always out to helping people.
@Osmany Linares Hey, I'm Adrian and I'm currently stationed at Ft Wainwright. I'm not an expert but here's my 2 cents. I think it's best to begin with the end in mind. Are you looking for cash flow or are you banking on appreciation? If Cash flow is what you're looking for then what is the number you would like to see per month on a deal? If it's appreciation, then what's your exit strategy?
About utilities. I usually go to Zillow or Craigslist and look around at what other rentals are doing. Especially the ones close to the subject property. Most of the time it's the rent + electricity therefore the owner pays for water and gas. You would have to do a research on that one to get a number that is as close to the actual costs. Hope this helps. If you're interested shoot me a PM and we can get together and share ideas. I'm sure we can learn from each other.
Good luck and Don't stop!
@James Cash Here are the numbers that I'm working with. When I talk about meat on the bone I'm referring to cash flow. As you can see If I don't calculate the utilities it leave me with $232 per month. with utilities included comes out to $25 a month (kind of too much risk for little pay off in my opinion). Please let me know what you think.
Thank you @Ralph R. I see that you're from Alaska as well, do you have any SFR ( if so how do you treat them as far as utilities and what you include in the rental agreement if anything)?
Hey @Adrian Fajardo, Thanks for the tip! I've looked at other properties for rent in the area and there's nothing as new or updated as my property so it's kind of hard from that point of view. There's a lot of ugly ducklings in this area but they still rent for 2k with water & heat included. My dilemma is ( Is the property too good for the area or is there anyone willing to give up free water & heat to live in a way nicer home)? Exit strategies are endless since it's a single family home, so not worried about that......
Thanks to everyone for their time, and I apologize for the late response!
@Osmany Linares Yes I have SFR rentals but they all are in Colorado. Tenants pay their own utilities there. all my properties have a property manager so they handle all the rental agreements. your in AK, so I know one thing right now. you want to pay for or be sure there is oil in the tank. I think most landlords in bethel pay the fuel oil and add the cost to the rent. if the heater stops working for any length of time at the all to common -40 below Fairbanks can reach in the winter you will have frozen pipes in just a few hours. RR
@Ralph R. @Nick Williams @Erik Nos@Adrian Fajardo
Thank you all for your comments...
Ralph: thanks on the tip for the utilities.
Nick: I'm 14 days away from closing on the deal and yes I'm using a VA loan. I've looked at everything on the market from 1-20 doors here in North Pole/FBX/Eielson area and not much seems to be a good deal (Unless I'm looking at it wrong).
Erik: I'll have to look up on how to set that up with the utility company, it seems convenient though. I do agree with your point of spreading the risk amongst multiple units compared to just one. Hopefully I can learn to achieve the numbers that you're getting in my next couple of deals but for now I just wanted to get my hand dirty and do trail by fire. Ideally, I'll get some landlord experience and a little bit of money on this one and use that knowledge on my future endeavors.
@Osmany Linares your on the right track buddy. What @Erik Nos isn't saying is that you SFR will go up faster than a four plex as the value in a multi is based on rent alone. Your SFR can be sold retail price to a home buyer. You NEVER buy for appreciation tho. He's also not including cap ex vacancy or maintainance in his numbers. Your figures had those numbers. Also most SFR rent for a higher rate per square foot. At least that's my experience I own 3 Multi's and 2 SFR. Buying the 3rd SFR now and ready to put an offer on number 4. They pay better than the Multi's. Multi's are safe as he suggests as one vacancy won't hurt you as bad. I did start out with a SFR then followed up with a multi for some depth. Also people in the Multi's seem to be a little more transient than the SFR. More vacancys. That's my story and I'm sticken to it. RR
Thank you @Ralph R. for reassuring me, I was doubting my move for a second. That's interesting that you mentioned how you got started, my wife and I had the same thought process. A SFR first then Multi's get the experience from the different types of properties and figure out which ones cater to us more, then move on from there. Sorry if I'm over stepping but do you still finance your properties with loans? I can't see the banks lending me past three or four properties. Also, do you mind sharing how far apart you bought your properties (6 months, a year, two years)? I was thinking if this investment works out, I'll buy another one after a year but I have no idea if a bank would lend me the money that soon. Thanks again!
@Nick Williams I would love to jump on a good Multi-family deal, if you find one send it my way. I've looked at Multi's for the past 6 months and out of the hand full good ones that I've seen, only one made sense when you take into consideration (the amount of work that has to go into them 20-50K, how small the units are 600-700sqft, how expensive the properties are selling for 260-320k and how low the rents are compared to the listing price 1100-1300) 2-4 doors.
That's the idea, live in the SFR for a year and then purchase a multi-family and house hack that, and so on and so forth (unless I can find a steal and then I would offset the income from the Multi with the expenses from the SFR by staying in the home until I move, at that point I would rent both and hopefully have positive cash flow from both properties).
@Osmany Linares I started by accident. When I moved to ak I wasn't able to sell my SFR because I was upside down. (Low down payment loan and values fell). I rented it for all I could get and made up the difference out of pocket. It was several years 3? Maybe then I bought the duplex. Then another duplex and a third duplex last year plus aSFR last year and I'm under contract on another now. The loans after a bit get tough if your using conventional financing. I use portfolio loans now as there is no limit. They are all financed this way. 25% down 25 year amortization 10 year balloon. The lender accounts for a portion of the rent on the new property as in come. Smaller reserves required. Safer too as you have skin in the game. When you get to that point equity management starts to play a role. RR
@Osmany Linares, I would tend to agree with @Ralph R.. We bought our first 4plex in 2006 with 10% down and several since with 20-25%. I am much happier with the cashflow and risk tolerance of the buildings with at least 20% down even though I was against the idea at first. On the Kenai Peninsula we are able to have our 20-25% down 4plex have only 2 renters (2 empty) and still break even. That is the peace of mind I am willing to lose ROI for. Best wishes for your real estate investment journey :)
Thank you for sharing@Ralph R., I look forward to getting to that level of investing. The hardest part for me right now is not buying everything that looks like a good deal. I noticed I gotta start focusing on finding great deals instead of just good ones.
@Tyson Cox yes there's something to be said for some skin in the deal. Too much and your losing opportunity and time value on your money. To little and you risk a crisis if the rents fall or there's too many vacancys. Currently I have about 48% equity My bank likes me Have at least 40%. I would like to keep it around 30 % but they get growley about that. I like the 25 year amortization a too. As long as I can still pull some cash flow. On a more important note Did they lower the sport fishing limit on Halibut in the inlet?? Thanks. RR
@Tyson Cox thanks for the words of encouragement, I feel the same way right now the whole low or no money down is really appealing. The 20-25% is definitely something to keep in mind for the future. I'm just glad to see that so many people are being successful at this!
@Osmany Linares yeah you only buy once. Means you gotta make that count. I don't buy much off the MLS. It's mostly pocket listing from Pm's or from realtors they recommend. Getting real hard to do that now days tho.
@Ralph R. I've noticed there's a lot of unfinished projects around this area and there are a few foreclosures as well. I visited the court house the other day and there were a lot of properties up for auction so that might be a place that I can get a good deal. I just have to go to a couple of them to get the hang of it.
Hello everyone, I'm about to invest in a SFR in North Pole AK near FBX. I ran the numbers and it works out if I include the utilities but doesn't leave much meat on the bone. I was wondering if anyone has any suggestions as far as including the utilities or what's customary in this area? Thanks!
Welcome to the area! I have lived here for 9 months or so, not sure what I think about it yet.
I was looking for a 2-4 unit when I first got here, did not find anything that penciled out and did not have any red flags like bad foundation. I am renting for the first time in 7 years or so, and I have to say I love it!
The idea of oil heating scared me off as well. If you were ever to move away from here, it would be tough to make these investments work. I am not convinced that responsible and hard working enough PMs exist here.
I am done with SFHs for a while, looking for a 10-20 unit in Anchorage. More job diversity, infrastructure, more PMs, milder weather, and natural gas are nice hedges to have.
@Adrian Fajardo @Nick Williams
I have already broken bread with these two gentlemen. I have known Nick a while and just met Adrian the other day.
Best of luck to you and let me know if you ever want to talk RE!
@Andrey Y.I ran into the same thing with the 2-4 units around here. Thankfully for me the Air Force has a program that is really similar to PM services. As far as going commercial I don't feel too comfortable but I hear that's the way to go if you have the funds and knowledge.
I think @Nick Williams started a REI club here in FBX so I'm looking forward to attending and hopefully get a chance to put a face to a name.
Good luck on the 10-20 unit acquisition, please let me know when you pull the trigger on it, I would love to pick your brain.
@Andrey Y. I think we have met here before too. If I remember right I told you FBX was a different place to manage a rental. You will find all of AK is that way. Be careful I'm told the market is kinda flat in anchorage. The state is out of money due to the oil prices falling and they are one of the biggest contributors to the construction industry. No state contracts = no Davis bacon construction projects= lots of high paying jobs not happening. The slope has already laid off a significant amt of people reducing the incomes of many people. I sense a teetering market. Many others agree. Prices could come down anytime. That's my $.02 worth. RR
@Andrey Y. I think we have met here before too. If I remember right I told you FBX was a different place to manage a rental. You will find all of AK is that way. Be careful I'm told the market is kinda flat in anchorage. The state is out of money due to the oil prices falling and they are one of the biggest contributors to the construction industry. No state contracts = no Davis bacon construction projects= lots of high paying jobs not happening. The slope has already laid off a significant amt of people reducing the incomes of many people. I sense a teetering market. Many others agree. Prices could come down anytime. That's my $.02 worth. RR
Ralph,
That was also my worry. I saw the same statistics you did. Healthcare jobs growing, every other job sector losing in Anchorage.
Rental income has decreased 5-10% over the last couple of years, but occupancy has actually increased in the small MF space. It seems that cap rates have softened, but only to the degree that interest rates have gotten up a tick.
I think with careful attention to find a deal that is a good one, providing room for an even greater correction, that still generates income, should be a good deal. I am tired of one mortgage, one insurance payment, one accounting for a SINGLE property -- I'd rather do the same for a larger apartment.
Anchorage has been in a recession since late 2015.. there is job contraction and I think a small population loss.. numbers still SEEM to pencil out, and vacancies are still very low. Thoughts?
@Ralph R. @Andrey Y. My only piece of mind is catering to the military and knowing that a few thousand people will be moving to the North Pole area in a couple of years. I spoke with the powers that be about building houses on base for the arriving airmans and The word is they don't have the funds to build. I'm assuming that's going to create more demand and growth for the city.
@Ralph R. @Andrey Y. My only piece of mind is catering to the military and knowing that a few thousand people will be moving to the North Pole area in a couple of years. I spoke with the powers that be about building houses on base for the arriving airmans and The word is they don't have the funds to build. I'm assuming that's going to create more demand and growth for the city.
That's the same thing I heard a year ago. My reasons for not having a rental in INTERIOR ALASKA still hold. I agree if you can be here to manage it (or manage the property manager), you could probably do quite well. When you leave, people want double the money during the cold winter months to do the same work. Also, fuel prices are cheap now. They were double this price a few years ago.
In a cold winter month, you may spend "only" $400 on heating costs. What happens when fuel prices double again (and they will)? You do the math ;) Not trying to discourage you, but being a landlord in the arctic is a whole new ball game.