Dan Rowe ABR CRS GRI
Dan Rowe Realty
911 Balsam Boise ID 83706
Boise Idaho Real Estate Investing
May 2020- I was expecting another year of double-digit appreciation in home prices, but the virus and shut-down have slowed things a little. Mortgage rates are near all-time lows, which should bring out more buyers this summer.
The most significant trend in Boise area real estate is growing population, being one of the fastest growing cities in the nation. The exodus from California continues, but people are moving here from many places for our more affordable homes, low crime rate and low cost of living. Some say low wages too, but it's all relative- and our wage growth has been strongest in the nation recently.
As a result of the population growth, Boise housing supply remains extremely tight and prices can only rise. Despite the cheap money, cash flow is tight and investors have been forced to bet on appreciation, which was not a bad bet last year- Ada went up 16% and Canyon 17.2% as of Q1. The tight supply means small discounts and tough competition from home buyers for starter homes, which are also ideal rental properties.
So why invest in Boise area homes now?
Reason #1 - Home prices are and should continue rising in the Boise area as the economy was strong, driving demand. Housing supply is extremely low and this won't change quickly.
Reason #2 - There's no bubble to burst in Boise home prices.
This table compares Boise Median Home Prices to all major metro areas in this part of the country. Boise's median home price is still well below the west, making it an attractive place to relocate to.
Reason #3 - These low interest rates are such an opportunity to lock in long-term positive-cash-flowing, positive-leveraged investments in Boise Idaho homes and real estate. I can show you how to buy with 75-80% OPM (other people's money) and your renters will pay them off, while you get dependable returns from cash flow, tax shelter and equity build-up, before any appreciation (the big money). Ask me to show you the numbers on money-making properties.
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 don't buy unless cash flow is break-even or better with a 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. There are 5 times as many home buyers compared to investors.
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, even with low mortgage rates. CAP rates under 5 percent? Might as well buy homes. After allowances for vacancy, maintenance and management, the cash returns are below break-even with the minimum 20 or 25% down. This forces you to bet on rising rents or appreciation for a good return. (Fine for now. However, when rates go up, your resale value goes down.) These multi-fam properties can also be much harder to sell in a downturn because investors stop buying.
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. You also would save self-employment tax on gains from your labors.
Flipping homes. I've helped clients do it, but the necessary discount to cover resale costs and profit is extremely hard to achieve in this market 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. I'm not big on get-rich-quick methods. Or taking advantage of distressed owners to make your margin.
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 higher interest rates, negating some 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 few short sales today. I usually filter short sales out of searches for my investors because A) it takes too long 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 only a handful of REO homes are for sale in Ada/Canyon counties (peaked at 750 in Dec 2010), 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.