The rental real estate market

10 Replies | Manchester, New Hampshire

I have looked at many  rental investment properties and I continue to find really impressive rental units in New Hampshire, anything 1 hour outside of Boston, in areas of Maine, closest to the Seacoast and in areas in Western Massachusetts. It seems this market is on fire again like in 2006. I see Cap Rates at 8% or more and rental prices that are  respectable compared to Boston and the Boston Suburbs. I viewed last week a 77 unit rental complex for 7 Million, of that entire complex only one unit is vacant... Indeed there is a demand for good rental units

Originally posted by @Christopher James :

I have looked at many  rental investment properties and I continue to find really impressive rental units in New Hampshire, anything 1 hour outside of Boston, in areas of Maine, closest to the Seacoast and in areas in Western Massachusetts. It seems this market is on fire again like in 2006. I see Cap Rates at 8% or more and rental prices that are  respectable compared to Boston and the Boston Suburbs. I viewed last week a 77 unit rental complex for 7 Million, of that entire complex only one unit is vacant... Indeed there is a demand for good rental units

 Yes, I noticed that back in 2016. It was very common to find 10-12 caps in NH/ME so I guess now the prices went up and dropped them to 8 caps. 

NH would be better since ME is seeing an exodus vs an influx. 

But still, the sub-$1000/month places are still very very strong in both states, as are SFH in NH.

@Marc Middleton and @Christopher James -

8 Cap seems pretty good in this market. I'm wondering the property and location class. Of course, with only 1 vacant unit, it's probably a decent property in a decent market and location, not a D asset in a war zone.

SFH isn't performing as well these days.

Rents are going up, and finding qualified tenants is not a problem (we always have a replacement tenant lined up with lease signed and SecDep collected before the previous tenant moves out), but the metrics have suffered due to rising SFH values.

Where we used to be at a GRM around 8.33 (or so-called "1% rule"); thereby yielding a 6.6 Cap assuming a 45% OER, prices have increased disproportionately to rents and our portfolio Cap Rate is now closer to 5.5% or lower (fact is, even if your SFH is fully remodeled like ours are and therefore have very little R&M or Replacement Reserves, NH RE Taxes are high enough to put you at or near 45% OER).

Not that I'm complaining about our asset values heading up (it's about time the RE recovery came to the tertiary markets of NH), but the ROE it's causing is tough to live with; especially given the lost economies of scale when comparing a portfolio of SFH to a large MFH complex. It's just not passive enough for the ROE it produces.

I'm becoming more and more interested in parlaying our equity into large MFH; preferably 150 units or more in order to support on-site in-house management and maintenance. Ideally something with a value-add play if a such a thing can still be found without going into C- or lower areas. 

A C+ property in a B or B+ area where the B properties are fully leased, thereby suggesting that there's demand for more B units, would be ideal.

If anyone in the area is interested in pursuing one or two properties like that, I'd be interested in discussing the possibility of combining our abilities and capital to make it happen.

I'm really impressed with how well you know your numbers, without proper data, you can't make informed decisions. I'm a lifelong NH resident, and I have started to look around for owner financed SFH's that need some rehab but it just doesn't seem sustainable. I'm over in Bow and you can't touch the 1% rule, houses are starting in the $230k range but rents are probably somewhere around $1800 not to mention 7k worth of taxes. There are obviously cheaper towns to start in, but even in rundown areas such as Suncook you can see a rough house going for $130k and it needs a total rehab. I worked as a contractor for a multifamily investor for some time and they seem like the best way to go to get over these high property taxes and rising SFH values with the economies of scale, but for me the market entry cost is so much higher with the required 25% down.


Originally posted by @Troy Zsofka :

@Marc Middleton and @Christopher James -

8 Cap seems pretty good in this market. I'm wondering the property and location class. Of course, with only 1 vacant unit, it's probably a decent property in a decent market and location, not a D asset in a war zone.

SFH isn't performing as well these days.

Rents are going up, and finding qualified tenants is not a problem (we always have a replacement tenant lined up with lease signed and SecDep collected before the previous tenant moves out), but the metrics have suffered due to rising SFH values.

Where we used to be at a GRM around 8.33 (or so-called "1% rule"); thereby yielding a 6.6 Cap assuming a 45% OER, prices have increased disproportionately to rents and our portfolio Cap Rate is now closer to 5.5% or lower (fact is, even if your SFH is fully remodeled like ours are and therefore have very little R&M or Replacement Reserves, NH RE Taxes are high enough to put you at or near 45% OER).

Not that I'm complaining about our asset values heading up (it's about time the RE recovery came to the tertiary markets of NH), but the ROE it's causing is tough to live with; especially given the lost economies of scale when comparing a portfolio of SFH to a large MFH complex. It's just not passive enough for the ROE it produces.

I'm becoming more and more interested in parlaying our equity into large MFH; preferably 150 units or more in order to support on-site in-house management and maintenance. Ideally something with a value-add play if a such a thing can still be found without going into C- or lower areas. 

A C+ property in a B or B+ area where the B properties are fully leased, thereby suggesting that there's demand for more B units, would be ideal.

If anyone in the area is interested in pursuing one or two properties like that, I'd be interested in discussing the possibility of combining our abilities and capital to make it happen.

No income tax, property taxes are 3rd highest in the country I believe.

Originally posted by @Grant Rothenburger :
Originally posted by @Christopher James:

In addition, no sales tax in NH which means tenants have more usable cash

 I never knew that, nice! Income and property tax higher?

Todd. I would suggest looking at multi units. I generally don't consider anything unless there are at least 3 rental units to off set the monthly debt. I know no body that is buying S/f 's at retail and renting them with good returns. The numbers don't work

Message me or lets get together at a Starbucks in Concord