I am looking at potentially getting into some multifamily investing with a friend that lives up in Anchorage. I was wondering if any local investors could share some insight on their opinion of the market there in general and if there are any areas in town you think are great for investing or should stay away from. I was also wondering how much to expect in maintenance on a property up there and a typical vacancy rate to expect when running the numbers on some properties. Also, have all the earthquakes up there caused issues with properties or have they held up pretty well?
Most properties have held up well after the earthquake. The area called "sandlake" has a neighborhood with about 14 houses that sank 1-12 inches, so I'd stay away from that area. Also stay away from Mountain View, and Fairview as they probably have the most crime than any other part. Some realtors/people like to call Mountain view "eastside", which is totally incorrect so watch out for that. East Anchorage does have some "ghetto" areas too, like Muldoon road by the highway, Pine street area, and bragaw st. area. I grew up on the eastside, so I know all about it. I prefer to invest in eastside though, because of its proximity to our Joint Air Force and Army Base (called JBER), The Chester Creek Trail, and our proximity to Tikahtnu Commons Shopping Center. Anyway, Good luck to you guys!
@Cody A. - Everything @Cam Jimmy just wrote plus - there are some value add areas now - parts of Spenard - and where Debarr T's into Muldoon has seen a lot of good redevelopment happening that creates some opportunities. Small commercial multi-family has better cap rates than residential multi - I think largely due to supply/demand pieces. If you can get by the UMED area - typically you'll find good tenancy as well - and like Cam I am personally invested in the east side (actually between the UMED and JBER - our two biggest employment zones).
@Jamie Rose Ah yes, UMED! I have a duplex there with great tenancy.
Hi @Cody A. , I second everything Jamie and Cam said except that things have held up well after the earthquake. I think it is really too early to tell as most residential places have not been professionally inspected for structural damage if it wasn't completely obvious. Eagle River (15 commute community) was geographically closer to the epicenter and has seen much more severe damage due to their lower IBC and local code requirements. I would just recommend adding in a structural inspection to your buying process. Un-reinforced brick and anything built before 1964 (though not abundant in our market) is likely built to a lower earthquake rating than newer construction. At some point in the late 1980's everything switched to 2x6 construction which increased the insulation thickness and energy efficiency of the houses after that point. As far as where the market is at, most economists think we've bottomed out and will start adding jobs again in 2019. Definitely a buyer's market at the moment.
@Cody A. All good info here.
Most things with a "view" in the name, north of the glenn highway tend to be higher crime rates.
If you're looking for something close to the 1% rule, I would stay somewhere in the heart of Anchorage. Not too far south, not too far north. UMED, as stated, is great for students. Some parts of Muldoon and Eastside tend to be great for military. It depends on your strategy though. Are you going 2-4 units, or 5+ units? Are you doing Air B&B, or are you strictly leasing it out to tenants?
Most of the time when you're buying, you'll do a proper due diligence / inspection phase, so I wouldn't sweat the earthquake stuff, just do your part and check it out appropriately.
Most likely, you're going to be buying an 70's-80's build if you want good cash flow. As long as your roof, windows and heating system are in good shape, you won't have too much to worry about. I usually only recommend upgrading/rennovating for resale, and most multi's sold are adequate enough to rent without updating.
Thanks for the input everyone that helps a lot on narrowing down some areas to look at.
With Anchorage being a little bit of a seasonal town does that cause an increase in vacancy and difficulty finding tenants looking for full 1 year leases, or is there plenty of year round stuff that it's not a huge issue?
@James Cash For this first property we would be looking for a 2-4 residential to start out then might possibly look at commercial after that.
@Jamie Rose What cap rate are you typically seeing on the different properties?
@Cody A. Not really any difficulty, it's pretty steady. Last time I saw a report vacancy rates around 5% FYI. They used to be closer to 2% almost 4 years ago, but we're pretty steady.
I usually just recommend leasing out in the summer, with a year lease, no option for M2M after that. Leasing is slower in the winter (along with sales) as people are less inclined to move when it's snowy and cold.
I would also recommend a fourplex, it's going to cashflow better. Cap rates are all over the place depending on a lot of variable factors around the property, but I usually don't say to pull the trigger unless we're seeing about 8% or so. Not too hard to get that cap rate.
We just moved up here in June and we are house hacking a 4plex in NE Anchorage off of Muldoon. Currently have everything filled with tenants paying rents $300-$400 above the rest of my street because we updated all cosmetics. Moving into our next property sometime in Sept we expect this 4plex to cash-flow somewhere between $1200-$1500/mo.
You really have to buy right up here, which is the challenge. The majority of residential properties up here are way overpriced and undervalued with rents for it to cash-flow well unless you structure the deal appropriately. I pay utilities for my tenants minus electricity. Last few months gas has been ~$400, water ~$145, Internet ~$175 (I provide it as another measure of control and a way to justify a gross lease structure and charge more), Trash ~$155 every three months, lawn care/snow removal can cost ~$300/mo if you are going to outsource that, and electricity has been ~$115 for my unit and the common area I pay for. Once I move and hire a manager I expect cash flow to decrease to ~$800-$900/mo.
We survived the earthquake with no real damage. We are having a structural engineer come out next month to do an assessment to provide a written report just for peace of mind and to ease buyer's minds when we look to sell in 10-20 years. Rental market is very stable - and its not hard to set yourself apart from the other renters in the area if you put simple touches on your property to stand out (include a TV, pay for internet, electronic fireplace, etc.). All said and done, even with high utility payments listed above, I am still living for free for what I charge in rents, and will still be making an awesome profit once I move.
@Cody A. - What James wrote is true - of course - the variables in real estate are huge (location, condition, etc.) - but an 8 Cap is a good frame of reference unless you want to go for top A grade - or are willing to go after really rough stuff. Duplexes won't perform like that... 6's are better than 4's, etc.