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
@Andrey Y. Point taken, but what's the alternative?
On the other hand if the price of oil sky rockets again and the numbers don't add up (as a last resort) we can always do a rent to own with a two year balloon and let the tenant be responsible for all the bills and small repairs....
@Andrey Y. actualy the interior is booming right now. the money out here is different, its all federal money, the hospital, by pass mail, and most all services are funded by the Feds. shipping, the airport, schools new villiage runways are all federal money, and davis bacon wages to boot. something that's declining in ANC. the local hospital is building a new hospital that will bring 350 new employees all paid with federal funds mostly. construction has started and will be complete in 2 years. another BPer on here (@Michael Chung) made and offer on a 2/1 sfr recently. asking price was 189K. his offer was 189 and he would beat any offer by$1000 dollars up to 205K. he didn't get the house! I was shocked! so was he. it sold for all cash at 189. on the market 3 days. two other houses sold for $350 and $330K. both on the market less than 2 weeks, one only about 3 days! Ive had 2 offers on my house and its not for sale. its 750 square feet, appraised at 194K last month for a refi. both for appraised value. the local PM told me I could get 1695 a month rent. my payment is 819. tenant pays utilities. oil for this house is about 200 gals a year at $6.00 a gal. oil has NOT dropped here! you do the math. I get about 350 a month CF. after PM, vacancy, oil and insurance. no taxes in the bush. I allowed 8% for repairs. this market will/should peak in a couple years. im thinking if I leave before that I will rent it till the hospital is done. Anchorage scares me because the low oil price, north slope lay offs and general economy is teetering there. there are others on here that agree. There is also a gold mine (Donlin) that eventually will happen at least many people think so. everything needed for that would come through bethel at least until they got rwy's built. even then the barge might be cheaper. don't sell the interior short! the price of oil isn't predicted to go up any time soon so I wouldn't worry about that. RR
The Anchorage market is softening. Usually you see the high end houses softening first, and that happened almost a year ago. A few years ago, anchorage had a 2% empty rate for rentals. I would put one of my places up and have it rented within a week or less. Now it's closer to two or three weeks.
I just purchased a 4 plex we are rehabbing and turning by into a 5 plex. This place has 3 bedroom units and so I'm hoping higher demand means they rent more easily. I'm not purchasing to sell, I'm concerned about the rental market. I purchased well enough to be able to lower rents to fill the units and still make a profit. Scary time for sure but always opportunity. A few may remember the bubble in the early 80's. Some smart investors invested heavily and when the market revovered a few years later, they were very well positioned.
@Andrey Y. actualy the interior is booming right now. the money out here is different, its all federal money, the hospital, by pass mail, and most all services are funded by the Feds. shipping, the airport, schools new villiage runways are all federal money, and davis bacon wages to boot. something that's declining in ANC. the local hospital is building a new hospital that will bring 350 new employees all paid with federal funds mostly. construction has started and will be complete in 2 years. another BPer on here (@Michael Chung) made and offer on a 2/1 sfr recently. asking price was 189K. his offer was 189 and he would beat any offer by$1000 dollars up to 205K. he didn't get the house! I was shocked! so was he. it sold for all cash at 189. on the market 3 days. two other houses sold for $350 and $330K. both on the market less than 2 weeks, one only about 3 days! Ive had 2 offers on my house and its not for sale. its 750 square feet, appraised at 194K last month for a refi. both for appraised value. the local PM told me I could get 1695 a month rent. my payment is 819. tenant pays utilities. oil for this house is about 200 gals a year at $6.00 a gal. oil has NOT dropped here! you do the math. I get about 350 a month CF. after PM, vacancy, oil and insurance. no taxes in the bush. I allowed 8% for repairs. this market will/should peak in a couple years. im thinking if I leave before that I will rent it till the hospital is done. Anchorage scares me because the low oil price, north slope lay offs and general economy is teetering there. there are others on here that agree. There is also a gold mine (Donlin) that eventually will happen at least many people think so. everything needed for that would come through bethel at least until they got rwy's built. even then the barge might be cheaper. don't sell the interior short! the price of oil isn't predicted to go up any time soon so I wouldn't worry about that. RR
I don't know about Bethel, but selling a house on Fairbanks is one of the most daunting things to do. It's not uncommon for folks to try 4, 5, 6 7, or more times to sell a SFH. Different realtors. The statistic is something like 2/3 of homes in Fairbanks are unable to be sold when listed with a realtor on the MLS.
Like I said, if you will be here long term to keep on eye on the place, the PM, hoping the pipes don't freeze if the boiler isn't repaired in time, etc. People don't like coming out and doing work in -40 weather, imagine dealing with this out of state.
I am not talking about homes bought a decade ago doing well. Obviously if you still have them, they are doing well enough ;)
The Anchorage market is softening. Usually you see the high end houses softening first, and that happened almost a year ago. A few years ago, anchorage had a 2% empty rate for rentals. I would put one of my places up and have it rented within a week or less. Now it's closer to two or three weeks.
I just purchased a 4 plex we are rehabbing and turning by into a 5 plex. This place has 3 bedroom units and so I'm hoping higher demand means they rent more easily. I'm not purchasing to sell, I'm concerned about the rental market. I purchased well enough to be able to lower rents to fill the units and still make a profit. Scary time for sure but always opportunity. A few may remember the bubble in the early 80's. Some smart investors invested heavily and when the market revovered a few years later, they were very well positioned.
What exactly do you mean by softening.
Are cap rates creeping up? If so this is great news as I can buy at a discount. I know rental income has taken a small hit, but I heard vacancy rates for small MF are around 2-3%, which is actually a bit lower than they were a few years ago! What have you seen?
Lots of good points on this post. Definitely learning myself!
@Osmany Linares just curious. You mentioned that you would be using the VA loan on purchasing a SFR? One of the requirements of the loan is to make this property your primary residence. I'm just wondering how are you going to rent this place while living in it if you don't mind me asking?
@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
I am an investor in anchorage and currently own 11 doors. If it's a single family home, the renters should definitely pay all utilities, they are the only ones using them! Most utility companies set up an account that if the renter doesn't pay, the landlord gets notified and has the option to pay. Even with the renters paying, that doesn't seem like a lot of cash flow. I usually am looking at about a thousand per 2-4 plex after utilities and mortgage. One bad renter that requires an eviction and you are cash negative for two years. I agree with the previous comment on buying a 4 plex. More income, and if you have one unit empty or needing rehabbing, it's 25% of total income lost, not 100%. Va loan sees a single family, all the way to 4 plex as single family home if you live in it. Either way good luck!
I agree with @Erik Nosich, I live in Eagle River, Alaska and want to have my tenants pay all the utilities possible - if anything is separately metered, they pay for it. As Erik said, they are the ones using them! Especially gas and electric, which can be dreadfully abused here. Heat turned up full blast in the winter and doors or windows left open, lights left on in the summer, etc etc. If you put it in your lease that's part of their expense then they take it or they don't. As for properties that are several units and not metered separately, I've been reading about the RUBS system. Don't know a lot yet but what I've read makes sense. I actually ran into a realtor/property manager who is using RUBS with all the properties they manage in the Anchorage, Alaska area. He said it makes them all pay attention to their usage. You can google it and get a lot of info.
@Dolly Caswell Thank you for bringing RUBS up. I'm taking a look at it right now and it seems fair. I too was looking for a solution to have all the utilities billed to the tenants with properties that are not sub metered.
@Dolly Caswell thanks for the advice I'll probably go that route. I think is only reasonable! As far as the RUBS system goes I'm a little skeptical about it but if it was a must have then I would implement it. We have something really similar in the military, most of the time tenants complain about it because when other tenants move out they end up paying more money. In a 4 plex the bill instead of being split 4 ways is only split 2 or if 3 tenants move now only 1 is paying the whole thing and since the building is not sub-metered you can't turn off the main breaker to safe energy. The other problem that I've heard is having to pay for other people irresponsibilities. I have a friend that had it where they were in a duplex (2/1 on each side). They are two and the other side was a family of 4 (with two little ones), needless to say they got screwed. Like I said if I had to do it to save my neck I would, but I have a feeling I wouldn't have too many happy campers but that's just my opinion.
I have a duplex that is rented out in Fairbanks. I pay for the oil, water and sewer. It cash flows great for me. Fairbanks is getting the F-35s in a couple of years and the inventory is currently not present for it. Even so, I'm debating whether to just sell and move on or keep the income.
NP area has worked well for me over the long haul. Both in appreciation and cash flow. Because o the nature of business there, rentals will always be needed. Oil prices can hurt but having good efficient heaters is a smart investment. If oil prices go up like they doubled a few years back...people still needed places to live and prices could have adjusted accordingly. In my case, I valued my tenants long term occupancy more than I valued the 100 a month loss in fuel. Since then prices have stabilized, rents have increased annually and things are good. Think long term. But obviously buying at the peak in utility spike can be more difficult....