How is the residential real estate market like in NH?

Question

We are about to purchase our first mutli-unit condo complex in New Hampshire. We usually do business in Mass but we are having a hard time finding good deals on the larger scale in MA. The cash flow analysis of the prospective property is great and seems like a good deal, but one thing i am a little hesitant about is the low population and higher rent averages compared to what we charge in Mass. I know that NH is a nicer and quieter area compared to Mass hence the higher rents (plus the high property tax contributes to that), but from an Investment perspective i am getting worried i might not find tenants easily and have high vacancy %, since it will be eating from our profits, and the mortgage and expenses aren't cheap. The locations we are looking at are mainly towards the Maine border towns ( Rochester, Dover, Portsmouth) mainly.

Anyone familiar with the real estate environment for multi unit condo villages in Dover/Rochester/Portsmouth area of New Hampshire? Any input is appreciated! Plus are there any things I need to be aware of before dabbling into New Hampshire real estate on a commercial scale that are different than Massachusetts ? Thanks!

James S. · Answer

Hi Mahdi,

Check my post history for a lot more in-depth information as i answer this questions about the seacoast 3 or 4 times a year.

In short, vacancies are less than 1% in seacoast nh. Portsmouth is outside of everyone's price range, Dover is bordering on unattainable for entry level but lots of opportunities for people will a few million to play with, and Rochester is very very situational and I generally discourage non-local investors from buying there as it is very easy to end up with D class tenants in a D area if you aren't careful.

Would you mind sharing some details of the condo complex you are buying? I would like to start looking into that avenue as SFR and small multi are getting cost prohibitive here.

Also, dont sleep on the property tax. Mine just went up a grand this year on my primary home in Dover.

Richard Dale-Mesaros · Answer

We have a real shortage of both homes for sale and apartments for rent in NH, especially in the towns you mentioned, although Rochester is significantly behind Dover and Portsmouth in terms of perception from buyers. The influx of out-of-state buyers has impacted an already tight inventory situation, it's a little crazy right now and I see this as a pretty long-term thing because this influx will be sustained, not just a short-term COVID thing, now that a lot of people want to be in a more rural setting and have realized they can work successfully from home. I'm working on spec homes for both higher-end mountain homes and contemporary cabins AND affordable modulars, because of the severe shortage of all three!

John McRae · Answer

I am a small multi family investor in the Seacoast area....mainly Dover. No issues finding tenants here in A and B classes. Tons of development still going on in Dover. High property taxes are the killer and town will revalue quickly after you buy.

James S. · Answer

Hi Matthew,

I'd love to get more information from you about what and where your clients are buying in Rochester. And are they local or out of state investors?

I haven't seen a large climb in values there from my own searches, and I know that the perception of Rochester among renters hasn't changed. That said the best time to get into a market is a few years before that change is really noticed, so im not opposed to it per se.

Is it large companies just do better there vs individuals? Do you need to be a certain type of landlors (which I very much am not) to do well there?

anyway would appreciate any input you have that could help me understand that market better.

Thanks

James

Matthew Perry · Answer

Hi @James Smith, I am an investor, developer, wholesaler, and property manager from the Boston to Concord area. The Rochester has been crazy in the age of Covid, as it has seen month over month growth. There is a lot of moving peices there. First and foremost, it has always been a value play off the Portsmouth area but as people have been fleeing the cities in a mass exodus as people look for the safe and conservative play. There is not a lot over complication here, Rochester is a cap rate value play as its a haven of independent landlords who have owned the buildings for a long period of time. We have been flipping contracts and seeing a lot of mid sized investors (folks between 100-200 doors) scooping up the the two, threes, fours, and even fives with portfolio purchases. Where this comes from is the investors who are looking to grow door count, hold for three to five years and then move on. Is that a signal for long term health? Nope. Is it a positive sign for folks who are looking to cashout now? Absolutely. This is more indicative that there have been inefficient markets in the greater real estate market, and COVID is just bringing those to the forefront.

Matthew Perry · Answer

We have seen a real boom in those three towns that you mentioned, in particular within the Rochester market. Its fascinating because within the multi-family market there the market is only going up and up, as investors have been scooping up properties. I do not know how long it can run like this, but its interesting to see.

James S. · Answer

Yes the outskirts are better than downtown usually. The area around the hospital climbing up towards Somersworth and down 108, Salmon Falls Road, new subdivisons away from downtown. Gonic is NOT a good part of town, in general, even with the country club. Yes, the houses immediately near the club on Church St (and some of the areas off 125) are fine, but as you get towards 'downtown' Gonic, which is where the Church, the Mill, and The Post Office are, are decidedly not good areas. In fact the reason the church down there is called First Baptist Church of Greater Rochester is intentional; it used to be First Baptist of Gonic (30+ years ago) and they change they name to avoid the negative association that the word Gonic has with it. Drive down Pickering, Church, and Sherman Streets and I think you'll see a little better what I mean. That's not to say it's not getting better, it is, because almost everywhere is getting better, but no one in Rochester will tell you Gonic is a nice area. To my knowledge there are not any condos or townhouses in the Gonic area; the only apartment complex I can even think of is an old folks assisted living or rent controlled place on Felker St. To be fair, I mean the downtown-ish portion of Gonic; I'm sure they are putting in townhouses on some random street off of 125 somewhere or further down Pickering before it gets to Dover and becomes 6th St, but while those areas may encompass Gonic that's not what people think of when you say the word. Since there aren't a lot of rentals in Gonic, and the ones that are are mostly section 8, it's hard to say for sure. 1000 is what you would get for a townhouse/condo rental in many parts of Rochester; I don't know why someone would pay the same to live in Gonic.Again, if you go further into the sticks, they are building lots of 3bd 2bth townhouses and renting them out for 2k, even in Rochester, but the 1bd condo/townhome areas aren't really that much of a thing here, and most that are are owned outright by the tenants, or have been bought up by big developers like Chinburg and the Mills.

Account Closed · Answer

@James Smith Thanks for the reply! When it comes to Rochester, do you think the outskirts are better areas than downtown? I drove around the town and noticed that. Especially the Gonic neighborhood, I saw the Rochester country club over there so my guess was it was the better part of the town ? What do you think rents usually go for a 1BD & 2BD condos over there at Gonic? Talking about 900 sqft to 1000 sqft so average size townhouse ?

James S. · Answer

Ah OK. So well outside my purveyance (as a very very small-time investor of well less than 25 doors). Sounds like a good buy maybe for people who have a lot of money to toss around; I'm still going to keep advising us small guys pass on stuff in Rochester most of the time as it's not worth the headache at our scale.

How is the residential real estate market like in NH?

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