Portland, Maine - Good Rental Properties?

Question

I'm new(wish) to Bigger Pockets and researching cities to expand my real estate investments. I'm targeting small multifamily properties.

I recently stumbled upon Portland, Maine. Having grown up in NE, I often hear friends/family rave about how great Portland is (great food scene, artsy, craft breweries, young people moving there)...all the signs of gentrification. I found very few posts on this city, so I'm wondering if anyone is investing there that could provide some input. Doing some preliminary research, it appears you can get close to 1% rents on MFHs, taxes are higher than the midwest (but not crazy) and I assume there's strong potential for appreciation.

Anyone out there having success in Portland?

Katie Magoun · Answer

Portland investor here. I love Portland, but so does EVERYONE else. Here's the problem: Portland is so hot right now that investors are competing with other investors (normal), home buyers (even for larger multis), STR investors (probably the only way to make big money in the current rental market), developers, speculators, etc., etc., etc. It's a feeding frenzy.

Those who know the market think it'll continue on this hot streak through 2019. I'd personally steer clear of Portland for the next few years. We're barely able to make our numbers work, and we get excellent financing terms on our loans. And there is a strong sentiment in the city regarding the lack of affordable housing. The city voted down an effort to enact a form of rent control, but that was mostly because the effort wasn't truly going to fix the problem and the voters understood that. A better plan to address the problem would probably be passed. All of this is to say, investors can't expect rents to continue to rise without limits.

As for surrounding towns, that ship has sailed as well for the most part. Westbrook is a rapidly gentrifying mill town, with great employers (IDEXX, Maine Health), but it's closing in on Portland-level real estate madness. Expect to see costs per unit well above $100k, and multiple competing offers. South Portland is similar - if you can find any properties for sale in SoPo. We looked at Biddeford/Saco as well, and I think there is opportunity there, particularly in the C/D class neighborhoods. Gorham is another option, but there are fewer multis available in general.

Sorry to be a sourpuss, but if I lived and invested anywhere else, I'd probably give the greater Portland area a pass. We still keep an eye on the market and put offers in when it makes sense, but it RARELY makes sense anymore.

Cody DeLong · Answer

@Harrison Smith and @Katie Magoun hit it right on the head.  I do think Biddeford/Saco is the next big boom with Lewiston not far behind.  I will say I've found a lack of multi unit rentals in a lot of the towns around Lewiston.  It's not that they don't have them, its that they are all rented. I've had a few deals come across my plate in some areas that are mentioned and the numbers just aren't there.  However it doesn't mean there isn't a deal to be had, just need to grind hard to find the right one.  You won't find anything worthwhile on MLS either, you should be looking at wholesalers etc.

Harrison Smith · Answer

@Matt S. I think @Katie Magoun nailed it! Portland was the first city in Maine to really explode and its gotten crazy there. Out of state investors have joined the frenzy and it just doesn't make sense anymore. There was a huge housing shortage in Greater Portland about 4 years ago and that drove prices and rents way up. My company is actually just finishing off the last phase of our build out of 500 apartments around Greater Portland. We are filling the buildings before they are complete!

Westbrook is another market that has really heated up. My real estate team had a listing in Westbrook for a duplex, had over 100 people come through the open house, and sold it before dinner time that same night for WAY!!!! over asking. The other markets that are beginning to heat up and see activity increase are Saco/Biddeford, Bath/Brunswick, and Lewiston/Auburn. Units are still affordable (anywhere from $60K per door to $85K per door) but they are beginning to move quickly and prices are on the rise. Out of state money is also beginning to come in and that is driving things up as well.

There are great opportunities in Maine. Population is increasing for the first time in many years as the quality of life is unlike any other Northeastern state. Property is still affordable and profits can be made, but as more attention turns to these markets that will change.

I wish you luck on your search through this area. If I can help in any way, then please let me know. I am a Realtor, investor, developer, and the CFO of a real estate holding company that owns a management company, construction company, and $125M in local real estate assets in Southern Maine (none in Portland!).

Cody DeLong · Answer

Portland is too hot right now.  Seriously its over priced and not worth it.  Gentrification has happened and still is but everyone knows it.  Multiunits in the shittiest part of Portland (which isn't shitty) still go for way too much.  I'd suggest looking in the towns surrounding.  Everyone is moving out of Portland and into the surrounding areas due to the high cost of Portland rentals.

David Marshall · Answer

The rents in Portland are leveling off after a strong surge and there are large apartment buildings being constructed. Smaller multi-unit properties make sense for condo conversions and short-term rentals. It is hard to find a cash flowing multi-unit and they move fast when listed. I have a multi-unit in the West End that I bought years ago and it is cash flowing. For nine years, I served on the Portland City Council and I am willing to be a resource to BP members.

Matt S. · Answer

Thanks @Cody DeLong. Good feedback. So it's not possible to get positive cash flow at current price levels? Are rents still rising? People moving outside the city due to rising cost of rentals sounds like continued gentrification to me. I'll take a look at the surrounding towns.

Just a thought on gentrification...It's hard to know how long gentrification lasts. I moved to Williamsburg, Brooklyn 7 years ago. At the time, everyone was saying the area had gentrified, lower income renters were pushed out due to rising rents, and property values were the highest they'd ever been. 7 years later, property values have doubled since that time. We're finally no longer seeing people move to cheaper areas because rents are no longer rising.

Dan Weber · Answer

@Cody DeLong What towns would you suggest then? Thanks in advance!

Rob Milliken · Answer

I am looking to buy a few apartments houses. interested in 2-10 or something per house.

Anyone have any info on any from Hallowell Me to Sanford?

Bob Langworthy · Answer

I had a WEX employee in my office yesterday who is house hacking a duplex in Topsham. All of the charm of downtown Brunswick is minutes away with only a 30 minute commute to work.

Portland, Maine - Good Rental Properties?

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