phone: 208 794-6424
Real Estate Investor Blog
Boise area real estate and rental management blog
Considering Refinancing you Investment Property?

 

When financing an investment property with five units or more, the investor looks to commeciail lenders.  For those of you with rental properties with 4 units or less, such a fourplex or duplex, you will obtain a residential loan.  Here is what is happening in the commercial lending world.

 

For the past 12 months, T Bond Yields have been at historic lows.  How low you may ask…so low that T Bond Yields had never seen such low yields for the entire 230 year history of US T Bond yields.

 

In 1791 under Secretary Hamilton, the US assumed the Revolutionary War debt of the Colonies and confederation of States.  To pay the debt the US issued Treasury bonds at a yield of 3%.  

In the ensuing 230 years the T Bond Yield was never as low as we’ve seen in the past year.  

 

The Good News: On Tuesday (2/16/21) the 10 Yr T Bond Yield was at 1.30%.  

 

The Bad News:  In August (8/4/20) we saw a historic low yield of 0.52% 

 

Half Full - T Bond Yields are and have been in the lowest range ever seen by anyone currently alive.

 

Half Empty - Rates have more than doubled since the August low.

 

This begs the question:  Will rates continue to trend upward as they have since August?

 

The Answer:  Don’t believe anyone who proposes an answer.

 

The Black Swan is circling the US and world economies.  Last year the Black Swan brought the Pandemic.  This year the Black Swan is in flight but no one knows what unforeseen event is in the clutches of its claws.

 

Some think they see inflation in its claws.  Inflation fears are rising, but the Fed wants inflation to rise.  Fed Chairman Jerome Powell, Janet Yellen (Hamilton’s successor) have cautioned that inflation could accelerate for a time in coming months as the country opens up. But Powell and many private economists believe this will be only a temporary rise and not a sign that inflation is getting out of control.

 

Rush for the Exit:  Last year many lenders moved wholly or partially to the Exit. They viewed current yields as too low to compensate for the risk of investing in real estate.  That reaction was exacerbated by Pandemic influence on tenant capacity to pay rent.  

 

Fortunately many lenders have dipped their toe back into the lending market.  

 

Pick your Poison:  Lenders have to make a choice:  invest in a risky low yield stock market or invest in a risky low yield real estate market.  Fortunately, real estate mortgage investment is again seen as a viable place for lenders to place money.

 

If you own a commercial property or an apartment complex that requires commercial financing, we always suggest speaking to Boise's own, Jack Harty, with Harty Mortgage Advisors.  He's about as smart as they come.  Jack's contact information is below.

 

Jack Harty
HARTY MORTGAGE ADVISORS

950 W. Bannock St - Ste 420
Boise ID 83702
Mobile:  208 863 0655
Email:    jharty@harty.biz

 

Your Boise Investment Properties Team

Tony A Drost, Associate Broker, Swope Investment Properties

Stacy McBain, Associate Broker, Swope Investment Properties

Boise Hits 15 Year Low Vacancy

The Southwest Idaho Chapter of the National Association of Residential Property Managers, just released the 4th quarter, vacancy and rental survey results.  The data collected indicates that the trends in Ada, which includes Boise and Meridian, and Canyon county vacancy rates decreased by 2.96% from the 4th quarter of 2019 to the 4th quarter of 2020. This is the lowest point vacancy rates have been reported in over 15 years that the SW Idaho Narpm Chapter has been collecting data.

Ada County single family marketed rental rates increased by $142 per unit in monthly rent cost. While multi-family units in Ada County decreased by an average of $35.00 in rent per month in the fourth quarter of 2020. The overall marketed rent per unit increased by $42 in Ada County making the average marketed rent rate $1438 per month. One bedroom and studio multifamily units decreased during the 4th quarter of 2020 by $163. The largest increase in rent rates in Ada County was in pricing of available 3 and 4 bedroom homes increasing $138 per month on avarage for Ada County 3 bedrooms and $264 per month in 4 bedroom home pricing.

In Canyon County rental rates were marketed at an increased overall monthly rate of $120 putting the average at $1236. Single family homes in Canyon County had the largest increase in marketed 4 bedroom single family homes, where monthly rents increased $303 per unit and multi family units increased an average of $90 per unit, the 1 bedroom and studio marketed rents only increased an average of $2 per unit.

 

 

Investment Properties Value Growth to Slow

“Buy right, sell right”; seems easy enough.  Arguably, anyone that owns property in Boise, seems to have bought right.  But, how do we know when it is time to sell?  “When everyone is buying,” investors and contrarians could answer.

 

For some, the time to sell is now.

 

Ada County four plex cap rates closed the 2020 year with average capitalization rate of 4%.  In the last two months, three Boise fourplexes sold with a sub 4 cap.  It’s hard to imagine that investors are buying for the mediocre cash-on-cash returns; they’re chasing the appreciation.  We believe three factors have fueled the increase in prices.

 

Low inventory and high demand.

As of the day we write this, there are zero active fourplexes on the market in Ada County. Last week, there was one active fourplex on the Boise Bench and it went pending after 4 days on market with a list price is $697,000 for a 1977 built 4 plex. Two 2004 fourplexes, also on the Boise Bench,  just closed for $800,000 cash each, had been listed for $725,000. The increase was a result of bidding wars.

 

Fear of losing out.

Interest rates are low and Boise is repeatedly making headlines across the nation as a great place to live and own real estate.  Anyone searching to buy in the Boise area for longer than a few weeks can see prices on the rise.  Buyer’s that are repeatedly beat out in competing offers, see that they are chasing an increasing market.  To finally land one, they go strong and over the top.  It seems that everyone that ‘paid too much’ just months prior is already sitting pretty with added equity due to the appreciation building trust in the Boise market.  Many perhaps think that they can't do any wrong, except perhaps not buy.

 

Migration to Boise. 

The pandemic has fueled what was already an aggressive migration to Idaho, which directly affects the Boise real estate market.  The lines at the DMV are hours long and it is now taking weeks for new license plates to be issued.

 

How much higher can investment properties increase in value without increased rents?  To many, rents are already too high and seem unsustainable, considering Idaho income levels.  It is our belief, that the growth in our Boise investment property values will probably slow.  And it may be the right time to sell.

 

Your Boise Investment Properties Team

 

Stacy A McBain, Associate Broker, Swope Investment Properties

Tony A Drost, Associate Broker, Swope Investment Properties

 

Thank You!

Thank you to all the clients who have trusted us to help them sell and buy rental properties, apartments, fourplexes and homes this year.

 

Each sale also creates a donation to the Idaho Food Bank, the 2020 selected charity from all of us at Swope Investment Properties.  We've collectively contributed to 31,000 meals being provided to our local community.  And you made this happen by promoting and sharing in our business and referrals.

 

Clients are the heart of our business, and that's something we never forget.  Your repeat business and referrals are what keeps us rolling and client statisfaction is the number one motivator of the Boise Investment Properties Team.

 

And thank you for telling your friends that we were the team they could trust to get the job done, and to work hard on their behalf.  It worked!  They heard you, and then they hired us.

 

You helped Boise Investment Properties Team acheive sales of:

     8 - Apartment buildings/complex - including 3 partnership deals

     8 - Fourplexes

     3 - Tri Plexes

     9 - Duplexes

     21 - Single Family Rentals - many of which are then rented out within days of closing

     12 - Single family Residences (homes for owner occupancy and not rentals)

 

You've created 2 top producing agents in the entire investment properties category in 2019 for all of the Intermountain MLS* (and we're on target for similar results and rankings in 2020)

 

Two agents in the top three spots in the esteemed Swope Investment Properties brokerage, which according to the MLS Sales Data, holds the longest-running record for top producing investment-focused brokerage.

 

If you haven't given us a GOOGLE review and would consider it, or haven't read our reviews, please do so.  Some individual reviews are also scattered around Zillow, GOOGLE and Facebook.

 

We are so grateful to be your number one choice as real estate agents, and to serve as your investment real estate resource in the Boise are.  Thank you

 

Your Boise Investment Propeties Team

Stacy A McBain, Associate Broker, Swope Investment Properties, stacy@inflowpr.com, 208-921-0630

Tony A Drost, Associate Broker, Swope Investment Properties, Tony@BoiseInvestmentProperties.net, 208-794-6424

 

 

October Update on Ada County Four Plex Metrics

 

There were only 5 four plexes sold within Ada County (Boise, Meridian, Eagle, Star, and Kuna) in October.  Two were in Meridian and the remaining three were in Boise.  The average sold price was $660,000, with a high of $807,500.  Cap rates continue to trend downward as values increase faster than rents.  Although Boise rents continue to rise, they are doing so at a much more moderate rate.   Due to the low inventory, we believe cap rates will continue to trend downward.

 

The average Gross Rent Multiplier (GRM) for Ada County four plexes continues to climb at a steady rate.  The average GRM in October was 167 with a low of 152 and a high of 174.

 

At what point will investors find the returns too slim and what effects will that have here in Boise?  Will there be a big push to increase rents to make the investments pencil, or will investors continue settle for less cash flow?

 

Please contact us to receive the full report and graplhs.

 

 

Tony A Drost, Associate Broker, Swope Investment Properties

208-794-6424, Tony@BoiseInvestmentProperties.net

 

Stacy A McBain, Associate, Swope Investment Properties

208-921-0630, Stacy@inflowpr.com

 

 

 

Boise Investment Properties
Boise Investment Properties
Tony@BoiseInvestmentProperties.net
automatic
Property Finder
free property
Value Report
investment
Resource Center
Boise Investment Properties
With SWOPE INVESTMENT PROPERTIES
208 794-6424

SWOPE INVESTMENT PROPERTIES

1161 W River St., Suite 160 Boise, Idaho 83702
PH: 208 794-6424 | Fax: 208-385-7240