Rentals in Anchorage, Alaska

[Jessica S.]

Hi there, Looking to get feedback from those that have experience in the Anchorage, Alaska rental market. My husband and I are from there and typically return about every 2 months. We currently have 1 rental with decent return that has been rented for (5) years with 2 months total in vacancy. Right now Anchorage is undergoing many changes in terms of the oil jobs, state budget crisis and some increased crime. Many landlords are putting places up for purchase. For the long term, I'm thinking now would be the time to buy. Several places have decent cap rates (over 12%) and I have property mgmt + very reliable parents that will be physical eyes & ears. Curious about your thoughts on the outlook of the Anchorage market.

[Kevin C.]

There is a significant difference between the valley and Anchorage. Wasilla is already experiencing repercussions from over building four plexes and the rents there have decreasing 10-15% in a year with the exception of one bed units which are in short supply. I met with Rob Yundt owner of Yundt Homes two weeks ago and he expressed concern as well.
Anchorage has some good deals with the advantage being a larger and stronger tenant selection and stronger rents. The down side is the age of the buildings is significantly older. The well kept properties go fast with many not on the MLS. We just sold 4 nice 4 unit buildings to REX members that never hit the market. Seller was a REX member too. These buildings are amazing. All south Anch with each unit 3bed/2bath/1car and separate heating and electric. Rents at $1650 per unit. $640,000. Those are cash cows.
If you believe we are about to enter a mild recession due to low oil costs, you're best bet is in Anchorage. It's the hub of employment and everything contacts back to Anch in times of economic decline.
Interest rates are so low now, that even if prices fall 5% you'd still have a lower payment on a property should interest rates rise 1%. The rule is this: for every 1% increase in interest rate you lose 10% of buying power.
The best cash flowing properties we've been selling and seeing are one bedroom commercial properties in mid town Anch.
This is because they have low utility costs and minimal repair reserves since they don't attract tenants with children. Kids are harder on properties than pets.
Perhaps it's time for you to make the leap into commercial multifamily. They do perform better.

Kevin Cross
CCIM
Foundations Real Estate Experts