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Real Estate Investor Blog
Boise area real estate and rental management blog
Boise Residential Real Estate Update

Recently, Boise Regional Realtors hosted their annual housing summit. Real estate and the growth of the Treasure Valley is something that is at the tip of everyone's tongue, locals and visitors alike. As Realtors, we are having conversations every day about the state of the market and where things are at.

 

When jumping into the Boise housing market, the first thing discussed was how prices are driven by low inventory and an increase in purchasing power for buyers. With the pandemic, many have also decided to make moves out of bigger, busier environments and head to a place where they are able to afford more and have some space to be able to live and still feel safe. The jump in the market is not, I repeat, is not due to lending practices as was the problem a decade ago. Buyers are coming in with large down payments and 23% of all transactions wihtin thee Boise area were cash which has contributed to the increase in homeowner's equity and reduces some of the risk from the market.

 

Another factor affecting Boise housing prices is the lack of high density units. In 2019, the housing inventory only consisted of 18.2% being 2 or more units within the structure. This takes into consideration condos, townhomes, apartments and other multi-family properties. Through June 2021, only 15% of all permits were for 2+ unit structures. Having more multi-family properties is a great asset to a growing community like Boise, as it allows for higher density per lot, it generally means more affordable housing options and also spreads out construction costs.

 

Overall, homeowners gained an average of $71,000 year-over-year through Q1 of 2021 which is the second year in a row Idaho has had the highest increase of any state. Even with housing prices increasing an average of 32% year over year in Ada County (Boise, Eagle, Kuna, Meridian, Star, Garden City), its continuing to show as a strong market and both a great time to buy or sell. Whether you're looking at making a move with your personal home or investment properties, reach out so we can discuss your goals and come up with a plan!

 

Paige Brown, Associate Broker, Swope Investment Properties

Boise Investment Properties Team Blog

The Long and Short of Renting

Short-term renting is a fully-furnished, all-inclusive renting alternative that has been growing in popularity in Boise and beyond. There are pros, cons and a couple major decisions to consider, such as “how short,” who’s managing the home and whether AirBnB and the likes will be a primary source of guests.

 

The number one thing to note – the higher rent does not necessarily mean higher profits.

 

Short-term renting starts with a fully-furnished rental, which generally are a single-family home, condo, townhome, or even one or two units within a multi-family property. From there, property owners include all utilities, supplies, internet, and landscape. The property management also involves a lot more moving parts than a typical Boise rental. Lease terms may be as short as one night, or could last multiple months.

 

It’s true that the income is higher, but so are the expenses. When you weigh all that out, there are two ways to come out ahead when providing furnished, compared to unfurnished Boise rentals. Doing your own property management is one way to make a higher net, as short-term rental management costs 20-35%. This often helps put an owner’s net proceeds pretty close to where they otherwise might fall in a long-term/unfurnished rental, which typically costs 10% or less to manage. The other main benefit could be the ability to use your property, in part or in full, depending on the setup (e.g. when family comes to town, or perhaps you keep access to the garage).

 

For the most part, the short-term rental clientele is respectful, but there are bad apples in every bunch. In the review- based system of AirBnB, there’s also more accountability and documentation to help encourage thoughtful behavior. For those who slip through the cracks, at least their stay is brief, unlike bad long-term tenants’ stays.

 

There’s also a rental housing crisis in Boise that short-term renting may not be helping. This depends on who you ask. Some may view it as taking away more affordable rental units. Others may see it as adding units or adding transitional housing options for people who need time to achieve their next step of buying or renting. New grandparents, those remodeling or building homes, tourists, traveling workers, and new arrivals to Boise are among the many people who utilize short-term rental housing.

 

Stacy McBain

Associate Broker, Swope Investment Properties
Boise Investment Properties Team

Boise and Austin Share California Migration

Great Article from  with Austonia compares Austin to Boise, Idaho and the many similarities.

https://austonia.com/austin-vs-boise

 

What has booming population growth, a bustling outdoorsy scene and new trendy hangouts at every corner?

Turns out that's more of a trick question than many Austinites might think.

Month-by-month, Austin seems to be at the helm of Texas' California migration and has seen itself cast as the United States' next Silicon Valley. But despite less attention, Boise, Idaho has much of the same talk—and they're growing at an even faster rate.

 

With a similar outdoor and music scene, competing population statistics and more odd coincidences—their original newspaper is even called the Idaho Statesman—the two cities share more similarities than they might at face value.

 

Here's a look at how both cities are welcoming their unprecedented growth while grappling with not-so-unique growing pains.

 

"Don't California My-"

Idaho may still be thought of as a quiet farming state by faraway onlookers, but the state was the second-fastest growing in the nation with 17.3% growth in the past decade, according to the 2020 Census. The growth has mostly been fueled by migration to Boise from priced-out West Coasters and city dwellers looking for a slightly quieter life. Texas was just behind as the third-fastest growing state with 15.91% growth.

 

The Boise City metro was ranked the fastest-growing in the nation by Forbes in 2018 and has hardly changed pace. Austin and Boise often share top spots on national lists; according to Business Insider, the Austin-Round Rock-Georgetown, TX metro grew 33% in the past decade with a population of 2,283,371, while the Boise metro grew 24% to 764,718 residents.

 

Californians accounted for 10,073 new moves to the Boise metro in 2020, up 27% from the year before. Meanwhile, move-ins to the Lone Star State literally changed national politics as California lost a Congressional seat and Texas earned two in 2021, with many of those making their way to Austin. Each state even sports popular "Don't California My Texas" and "Don't California My Idaho" slogans for disgruntled natives.

 

They both even had one errant political candidate who suggested a wild idea to keep the Californians out. In 2020, a Boise mayoral candidate suggested building a wall to keep out Californians, according to a City Journal article. Sound familiar? In a similar vein, an Austin City Council candidate suggested the city put up a dome around the city to do the same in 2018.

 

Music, Greenbelts and river tubing

With its Barton Creek Greenbelt, picturesque Hill Country views and river tubing, Austin may think it has the Midwest city beat in the outdoors department. But Boise has eerily similar attractions; the Boise River Greenbelt, for instance, provides over 25 miles of hiking, biking and swimming through the city, while those wanting to take a signature Texas river tubing trip can take to the Boise River. The region swaps Hill Country attractions for Bogus Basin, a mountain resort that serves as a skiing hub in winter and hiking oasis come summer.

 

The Live Music Capital can even be compared to Treasure Valley's music scene; while not as reputable as the world-renowned Austin City Limits Festival, the city's annual Treefort Music Fest is growing quickly since its founding in 2012 and has been called "the west's best SXSW alternative."

 

Pushing outward

 

Each metro is pushing outward as well. Meridian, Idaho, the state's third-largest city that sits just minutes west of Boise, was the sixth-fastest growing large city in the nation by percent change from 2010-19, according to the U.S. Census Bureau. While Meridian grew by 48.3% in the past decade, Northwest Austin suburb Cedar Park was just behind with 44.2% growth in the same time span, while Round Rock was the 13th fastest-growing with 33% growth overall.

 

 

Tech influx

 

Austin, sometimes known as "Silicon Hills," has experienced a wealth of new tech HQs as tech giants and startups flock to the hub. With Tesla and Oracle making waves in the Texas Capitol, it might be tough for a smaller city like Boise to compete. But a few firms, including payroll provider Paylocity, have made the move to Boise, with significant investments from fintech company Clearwater Analytics as well.

 

 

Growing pains

 

But everything isn't always peachy in these trendy new hotspots.

 

Affordability crises and infrastructure issues have racked both Boise and Austin. A 2019 report by the state of Idaho predicted that the region would add more than 100,000 residents by 2025, and the result of straining growth has been rapidly increasing rent.

 

Forbes article ranked the city as the No. 1 housing market to watch in 2021, but current residents are feeling its effects. According to Apartment List, the city's rent increased more than any other city from March 2020-21 with a 39% rent jump. On Tuesday, the city said it would need 27,000 more housing units in the next 10 years to solve its housing crisis. The average one-bedroom rental in Boise costs about $1,500 monthly, $700 more than what the average Boise renter can afford.

 

Meanwhile, a new Zillow report says Austin could become the most expensive city outside of California as soon as the end of 2021. Austin's average one-bedroom rent is now just behind Boise at $1,442 a month, $367 more than what the average Austinite can comfortably afford. The median home price in the city of Austin hit an all-time high of $566,500 in May, rising more than $142,450 year-over-year, according to the Austin Board of Realtors.

Q2 Rental Vacancy and Rental Rate Report

The SW Idaho Chapter of NARPM, located here in Boise, recently released its quarterly rental vacancy report which includes good rental price data as well.  We have providfed their summary below as well as a link to the full report.

 

The data collected indicates that the trends in Ada & Canyon county vacancy rates have decreased by 2.64% from the 2nd quarter of 2020 to the 2nd quarter of 2021. In the 1st quarter of 2021, vacancy rates hit the lowest point reported in over 15 years at .81%. Vacancy rate increased slightly in the 2nd quarter of 2021 to 1.66%.

 

Ada County single family marketed rental rates increased this quarter by $177 per unit in monthly rent. While multi family units in Ada County increased by an average of $129.00 in rent per month in the 2nd quarter of 2021. The overall marketed rent per unit increased by $113 in Ada County making the average marketed rent rate $1679 per month. In Canyon County rental rates were marketed at an increased overall monthly rate of $58 this quarter putting the average at $1398.00. Current data shows that the average market cost of the Canyon County rentals home.

 

Read the full report here.

https://boise-rentals.com/files/118.pdf

 

Now, there's some catching up to do

 

 

 

 

 

 

 

 

 

We’ve tracked the Ada County, which includes the cities of: Boise, Eagle, Meridian, Kuna, and Star, fourplex metrics for 17 years now and it’s something we look forward to sharing each month, because they are so telling.

 

Each metric has a purpose and each trendline helps tell a greater story about the overall market.  Unlike the other metrics, Gross Rent Multiplier (GRM) is a good "first look" formula to apply.  It is the ratio of sales price to gross rents.  Anyone can multiply the gross monthly rent times the multiplier.  If gross monthly rents are $5,000 per month and the multiplier is 200, a ballpark value is $1,000,000.

 

 This month, we’re focusing on Gross Rent Multiplier (GRM) and the incomplete messages it may be sending.  At a glance at the rising GRM might lead and investor to believe that the sales prices are incrreasing faster than rents. Surprisingly, that’s not actually the case, despite that upward trend line which might suggest otherwise. Rents are increasing rapidly right now.  Current rents are generally not market rent, especially in this crazy Boise market.

 

The reason for this data “discrepancy” starts with events that occurred well over a year ago.

 

In late March of 2020, the State of Idaho and the city of Boise issued the stay-at-home order.  As businesses closed and folks lost their jobs, Landlords became concerned about tenants’ abilities to pay rent.  If rent wasn’t paid, how would landlords cover their expenses, such as the mortgage, property insurance, and property taxes?  All of a sudden, the notion of collecting some rent, seemed better than taking the risk of receiving no rent.  In the midst of a global Pandemic, the term “market rent” was quickly excused. 

 

The Pandemic was affecting us all, and we had to work together to get through it.  The Landlords needed rent to cover their expenses and tenants needed a place to live.  As a result, many investors and property managers focused on renewing their valued tenants at current rent, or in some cases, at a lower rent through the months of April and into the summer.  Most lease renewals were for at least 12-months.  As we all know now, the “pause” in Boise, was short lived and the Pandemic and stay-at-home order only fueled the appeal of Boise and the migration continued stronger than ever.

 

Now, there’s some catching up to do.

 

We use actual rents when calculating GRM, becuase historcially, many embellished the published market rent within the MLS.  In most cases, the actual rents for these fourplexes being sold are far below market rent.  Due to what we just described what happened last spring with lease renewals, we’re seeing actual rents around 30% below the current market.  When evaluating an investment property, it’s important to use a market rent. That will help bring the GRM back down and balance out the otherwise alarming GRM.

 

In summary, the Pandemic caused some panic and fear, which locked rents for a year or more.  Meanwhile the Boise market exploded and most of the rents for income properties hitting the Boise market today, are far below actual market.  Most investors realize this and are applying market rents in their valuations and the inclining GRM is not as concerning.

 

Your Boise Investment Properties Team

 

Stacy McBain, Associate Broker, Swope Investment Properties

Tony A Drost, Associate Broker, Swope Investment Properties

Boise Investment Properties
Boise Investment Properties
Tony@BoiseInvestmentProperties.net
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