Anyone familiar with the New Ipswich and Jaffrey NH areas

[Tawa W.]

HI recently started looking at properties in New Ipswich and Jaffrey. I really like the area but would like to get some input from an investor in the area.

I am looking for long term buy and hold rental properties, and would love feedback on:

1) Long term stability of the rental market. For instance, from the local RE agent, it sounds like a most of the renters work at Millipore.

2) Similarly, long term appreciation/depreciation. I am not overly concerned with this as long as there as been some growth and not much risk of decline.

3) Have you or would you invest here? Any other areas that you would recommend instead. I have been considering Manchester NH as well.

Thanks for your help.

~Tawa

[Troy Zsofka]

Hi @Tawa W.

We purchased a 4 bed / 1.5 bath single family home in Jaffrey in 2011.

We paid $50K and put just under $30K into it. New roof, siding, flooring, doors, furnace, etc, etc; so it will be a while before it needs any real CapEx.

Tough to tell what it's worth in this market, but Zillow has it at $160K and it's assessed at $141K.

Since finishing the renovations in early 2012, we have had the same tenant. They are moving out in October because they purchased a home in Rindge, so we just listed it for rent.

Their rent was $1,350. That rent is below market, and there's a shortage of good quality single family rentals on the market, so we currently have it listed a bit higher.

2015 APOD:

Income: $16,200

Insurance: $688.12

Taxes: $4,697

Water: 773.84

Management: $1,620 (we manage it ourselves but put that in there anyway).

R&M: $810 (we didn't incur this in 2015 but put it in there anyway because it's good practice).

NOI: $7,611.16

OER: 53% (mostly because Jaffrey RE Taxes are high, and the rent is below market at $1,350 since we didn't raise it for the last 4.5 years). The OER will dip below 50% at closer-to-market rents. Remember though, this is NH.  Even though the national average is supposedly 40-45% OER, our real estate taxes squash any chances of that (except maybe on low-end multifamilies). We save on the sales and income taxes, but those don't factor into an income property analysis.

I left out vacancy because the same tenants were there for 4.5 years, and I usually have replacement tenants lined up with a signed lease before the vacating tenants are out; so we really only lose the couple days it takes for repairs and painting. Even if we lost a whole month between tenants after 4.5 years, it would equate to less than a 2% vacancy rate. Our average tenancy duration is about 5 years across our portfolio (one advantage of single families over multi's). It wouldn't be unwise to include a vacancy factor anyway, but I've already included enough fluff that we don't actually incur, and our portfolio has an effective historical vacancy rate of less than 1%.

CAP Rate (based on our investment amount) is almost 10% with built-in expenses that we don't actually incur. As a function of value, on the other hand, it's pretty low (one disadvantage of single families, again thanks to the RE Taxes).

Overall, I would say that this one is by no means one of our best-performing investments, but it's treated us well as a rental, and will return nicely upon resale.

As far as what @Ann Bellamy said about Jaffrey being a rough town, I tend to agree. However, our strategy starts with acquisitions of properties in need of substantial rehab, and those are difficult to find in higher-end towns. If you can find them, they often get bid up by flippers who renovate on the cheap and pass the now covered up problems to the buyer (this is a generalization and not all people who fix and flip are like that, but there are enough of them out there to bid up the prices on acquisition opportunities in some areas). Furthermore, we have found that if we stick to nicer neighborhoods in towns like Jaffrey, and offer a higher quality product than most rentals out there, we can find well-qualified long-term tenants in addition to making a nice forced equity spread on the renovation. A strategy that has treated us well in many towns throughout central NH.

In regards to purchasing a multifamily in Jaffrey, I would not recommend doing so. Take a look at Keene. Even Peterborough has some nicer complexes. I'm not the best one to advise on this though, because while we own a couple duplexes, the vast majority of our portfolio consists of single family homes. 

My personal opinion is that small multifamilies provide significantly better cash flow than single families, but at the costs of lower quality tenants and higher turnover, and much more difficulty liquidating (no real estate asset is more liquid than a 3-4 bed / 1-2 bath single family home).

Happy investing,

Troy