Dan Rowe ABR CRS GRI
Dan Rowe Realty
911 Balsam Boise ID 83706
Boise Idaho Real Estate Investing
Jan 2023- Boise area home prices have fallen roughly 13% since peaking in Q2 of 2022 as higher interest rates and inflation have eroded buying power and our local markets have turned more in buyers' favor.
One year ago and before rates started jumping, I was reporting less than a 2-week supply of available homes- the tightest I had ever seen, due to Idaho's population growth and strong economy. Today we have roughly a 2-month supply, even at the currently slow pace of sales. These are still historically low supply levels, but much better conditions for buyers than we've seen in a few years. Negotiating a lower price, repairs, seller-paid closing costs or rate buy-downs is so much easier now with more motivated sellers.
Yes, mortgage interest rates have doubled since last year, but remain well below the 8+ percent long-term average over the last 50 years. Forget about rates under 5%. Those were once-in-a-lifetime rates.
How does Boise compare to other metros on home prices? Most major metros are experiencing rising supply and weakening home prices.
This table compares Boise Median Home Prices to all major metro areas in this part of the country. For Q3 of 2022, Boise's median home price is still well below the west and still lower than our closest large neighbors- Salt Lake City and Reno.
How should you invest in Boise Idaho real estate?
First, think long term. The last recession was a good reminder that you may have to outlast a downturn lasting several years, so look for cash flow that is break-even or better (positive leverage) with a reasonable cushion for vacancy & maintenance.
Rentals. I like best the single-family home held for income, equity build-up, tax shelter and long-term gains through appreciation. This is the safest way to invest in real estate and requires the smallest investment. Single-family homes command the highest rent, lowest vacancy, and easiest resale to the largest pool of buyers for liquidity- compared to investors, there are 5 times as many home buyers with many low-down financing options.
Multi-family Income Property Where's the income? Every time I crunch the numbers on available multi-fam properties in and around Boise, I can't justify these prices. CAP rates under 5 percent? Might as well buy single-family homes. After allowances for vacancy, maintenance and management, you'll need more than the minimum 20% down to achieve positive cash flow. This forces you to bet on rising rents or appreciation for a good return. These multi-fam properties can also be much harder to sell in a downturn because the already small pool of investors shrinks.
Fixer-uppers. Contractors or investors with skills, cash, credit & time can create great wealth by repairing/improving Boise area homes. Many older homes are needing repairs & updates. Buy them low, fix them to rent out and hold for appreciation and pay less taxes on long term gains. When you're ready to sell, then fix it really nice for resale.
Flipping homes. I've helped clients do it, but the necessary discount to cover resale costs and profit is extremely hard to achieve without building in your own sweat equity. There are other challenges- requires larger investment, higher taxes on short-term gains, much higher risk than long-term investing.
Use your IRA. The self-directed IRA allows you to utilize retirement funds to invest in real estate and get the same tax-deferred growth as your other investments. One catch: you can't use the property personally. If your IRA can't pay cash for a property, there are non-recourse loans available, but they require much larger down payments and much higher interest rates, negating much of the tax-deferred benefits.
Why Short Sales Are Usually A Waste Of Time- Priced for liquidation to avoid foreclosure, these are true distressed homes. Since home prices have been rising for years, there are no short sales today. I dislike short sales for my investors because A) it takes months for lienholder approval and you can't inspect, lock in a rate or plan a closing date until then. B) the price is not real until approved- lienholders often counter higher, C) property often not maintained and seller has no money for repairs, D) ties you up from making offers on another home unless you can buy both.
Foreclosed Homes- Now few, if any, REO homes are for sale in Ada/Canyon counties including existing homes, homes with acreage, condos, townhouses- all owned by HUD, VA, Fannie Mae, Freddie Mac and private banks and lenders. Also the occasional bank-owned multi-family income properties for sale; duplex, triplex, fourplex, apartments.
Dan Rowe always knows where the best buys are in Boise ID real estate. Call today (208) 866-3481 to start making more money.