Please point me to a new growing market in the Pacific NW

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Please point me to a new growing market in the Pacific NW

Matthew McNeil
Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes

After buying 3 SFHs in the Boise/Meridian Idaho Treasure Valley area, all of which are producing healthy positive cashflow, I'm ready to buy another SFH. However, the Boise area market is [arguably] the fastest growing in the US and home values are currently priced at levels that would result in zero or negative net cashflow because rents are not rising in proportion to values.  

Note; Even though the Boise area market home values are increasing by double digits annually, I’m not interested in anything that doesn’t produce positive cashflow (such as focusing on long term equity growth) for various reasons covered on other BP forums and blogs.  My real estate agent of 10 years, ranked as one of the best agents in the valley, confided to me that very few investors are currently buying rental properties in the Boise area – for the reasons listed above.

I'm ready to buy another SFH, and I’m looking for an alternative healthy market in Idaho or Washington.  Help me refocus on a new growing market.  Deeply appreciate anyone who can point me in another direction, based on what they're seeing and where they're investing after crunching their numbers.  Thanks!!

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Uwe G.
Vancouver, WA · Member since 2014 · 127 posts · 60 votes
8y
Matthew, that is really good advice all around and I like the comment in the last paragraph which focuses on higher quality homes fetching higher quality tenants.  That is great advice!

Originally posted by @Matthew McNeil:

@Uwe G. 

I started investing in SFHs 10 years ago. My portfolio isn't as big was many of the other BP investors (I'm on my 6th SFH). I'm actually from Oregon and I started by doing comparative demographic studies for Washington, Oregon and Idaho that included taxes, cost of living, current rental rates, job market, etc. by looking at stats available online. Idaho came out on top by a large margin and I'm very happy with how our investments have done. Regardless, however, every market has its respective potential and upside, but it's up to the investor to carefully crunch their numbers and be as objective as possible without "losing themselves in their spreadsheets."

Yikes, here I am sounding like an expert which I’m not, but I’ll use that as a lead-in for my next comment. Honestly, it’s not my wisdom or investment skills that helped me become successful with my investments. Rather, I give credit to a team of professionals who have given me excellent counsel and advise; my attorney, my real estate agent and my property manager. I have never made a move without proactively seeking out their honest advice, and they’ve helped me dodge a few bullets and pointed me in the right direction – all of which have paid off.

As for “main drivers” you mentioned.I think its important to consider an amalgamation of additional drivers that include good schools, infrastructure (is the county planning and building for growth), local government policy, and economic cycles. And, it would be a mistake in today’s world not to study what Millennials are desiring. Finally, we only invest in newer properties less than 10 years old. Two main reasons which I’ve learned over time; maintenance budget is much less and you can get better quality renters able to pay higher rent.

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  • Don SpaffordPro Member
    Investor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votes
    8y

    @Matthew McNeil I find it hard to find acceptable cash flows with SFH in Idaho, unless you bough them 10 years ago. I focus on small MF. There are decent MF deals around but they are getting harder to find as well with those prices also increasing. For SFH you probably need to look to the midwest or Southern states.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    just spit balling.

    Lewiston,   walla walla,  Omak ,  Tri cities ,  McCall for seasonal  ,  ID falls 

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  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    8y

    I think the I-5 corridor between Olympia and Vancouver is up and coming (Chehalis and Centralia are spending tons of money on new schools right now).

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Julie Marquez:

    I think the I-5 corridor between Olympia and Vancouver is up and coming (Chehalis and Centralia are spending tons of money on new schools right now).

    and while your at it you could go out were the esteemed Brandon Turner lives and invests Abeerdeen area.. plenty of lower valued SFR's in that area.

    Castle Rock is another below the radar but those areas ( all these are tough tenant areas) lots of displaced loggers and fisher type people.. so have to choose wisely.   Lots of social issues. 

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  • Matthew McNeil
    OP
    Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
    8y

    Don; thankfully I was able to buy 10 years ago and completed a couple of 1031 exchanges that brought me into newer SFHs with higher cashflow.   I'm netting a positive $2k+/month.  Boise/Meridian has been very good to me, but the current market is nuts!  My agent says investors have really stepped back from that market.  Is Idaho Falls worth looking into?  Thanks!

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  • Don SpaffordPro Member
    Investor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votes
    8y

    @Matthew McNeil I honestly have not looked too much into SFR in Idaho Falls. The few I have wouldn't work out well for my preferences. Prices have also gone up recently like in Boise where the rents don't keep up with the prices, unless you can do a BRRRR then it may be worth it. "Cheap" houses that were $70k not long ago are now over $100k but the rents for those are still only around $800 or so. I focus on multi family and have had better success with that. If you buy all cash then I guess anything would technically cash flow but the COC would not probably be worth it even if you did a refi to get some money back out to leave it with a positive cash flow.

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  • Meghan Billings
    Rental Property Investor · Twin Falls, ID · Member since 2017 · 49 posts · 8 votes
    8y

    @Don Spafford are you finding very many multi family properties in Idaho Falls, or are you investing out of state more? I would love to hear your input on markets. 

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  • Don SpaffordPro Member
    Investor · Idaho Falls, ID · Member since 2016 · 912 posts · 629 votes
    8y

    @Meghan Billings Hello, I mostly had been looking for 4 plexes. Recently they too have been getting overpriced and harder to find any that make sense. I look everywhere from Pocatello to Rexburg. I had searched some in Twin Falls but don't know the area enough. Most success has been near Pocatello & Blackfoot. I'm looking at some larger MF in IF though such as an 11 plex that the numbers look pretty good. I've changed from looking for great current returns to looking for ones that get a good return now but know that in time will become better as rents can increase, update the property to get more equity to use for others, etc. So it all depends on how you look at it.

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  • Meghan Billings
    Rental Property Investor · Twin Falls, ID · Member since 2017 · 49 posts · 8 votes
    8y

    @Don Spafford Thank you!  I’m in the struggle between investing in good investments in an area I know (Twin Falls/Idaho) or going out of state for great investments. 

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  • Matthew McNeil
    OP
    Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
    8y

    @Meghan Billings; I'm invested in SFHs in Boise/Meridian as I wrote above. I looked for MFs in that area, but none available for reasonable price. My property manager suggested I consider the surrounding areas; Star, Middleton and Nampa. I haven't crunched the numbers yet, but I familair with those places and would agree they are next areas ripe for growth. 

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  • Jonna WeberPro Member
    Moderator
    Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes
    8y

    Hi @Matthew McNeil! So glad to hear that you are enjoying your Boise properties. I do have to differ from the opinion that most investors are not buying.  Investors are buying heavily...looking to the demographics and projected growth in our market. If one is looking for a hard asset to put their spare funds in (vs, the stock market or a savings account), the argument to purchase is extremely compelling to many professionals.  It all depends on each investor's end goal.  As an added bonus, they get to travel to a wonderful destination  every year to check on their rentals!  

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  • Matthew McNeil
    OP
    Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
    8y

    @Jonna Weber: After spending weeks researching the market, gathering feedback from the BP family and looking at my long term goals, I find myself leaning towards buying another SFH in the Meridian/Kuna area. I'm a buy and hold long term investor and the growth in that area makes it hard to pass up on an unarguable growth area, which the state recognizes and the county is obviously preparing for. Options: put my downpayment into the stock market where I'm already well invested or buy another house. House is a tangible asset. Market seems to be over inflated based on a handfull of key stocks.

    1Reply
  • Uwe G.
    Vancouver, WA · Member since 2014 · 127 posts · 60 votes
    8y

    Hi @Matthew McNeil.  I feel energy stocks are a great value right now so that might be a good option and the dividend ones cash flow much better then average cap rate you are looking at. 

    I am a fan of SFRs and am looking in Vancouver, WA for 4 bedroom houses. We have a shortage of 4 bedrooms for rent. What kind of cap rate are you looking for on your SFR?

    1Reply
  • Jonna WeberPro Member
    Moderator
    Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes
    8y

    @Matthew McNeil all the best in your search!  The Spring has been in a buying frenzy, but it always levels out a bit as the heat index rises.  Yep, Meridian and Kuna are both growing rapidly...and at some point they will converge.  Ditto for Meridian and Nampa.  

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  • Matthew McNeil
    OP
    Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
    8y

    Hi @Uwe G.

    My current CAP rates on my 3 SFHs range between 6 and 7.5. I've looked carefully at the Vancouver market (my in-laws live there) and I feel the Boise/Meridian area has better long term potential with less maintenance issues due to the dryer weather. Vancouver is a great bedroom community, though, for Portland. Have you looked at Boise/Meridian? Prices would be comparable for similar house. If interested, I can refer you to a great property management company.

    0Reply
  • Uwe G.
    Vancouver, WA · Member since 2014 · 127 posts · 60 votes
    8y

    Hi @Matthew McNeil, 

    That is pretty good on the cap rates.  I am targeting 6% or more for the cap rate on SFRs and it isn't easy (but stuff is out there).  I target Vancouver, WA because of the realtor and property management connections and I really know the rental market well.  Vancouver, WA reminds me of Bellevue, WA in 1999 and I think I am going to focus and build more scale locally as I am only looking to grow by 1 or 2 properties a year given this market.  BUT, I know that I will need to expand to other areas eventually and keep an eye out.

    I am interested in your thesis of long-term potential...what are you seeing as the main drivers?  I tend to focus on 4 main criteria:  Job growth, great healthcare, within 30 minutes to an International Airport (or one that has Southwest Airlines), and low taxes

    0Reply
  • Matthew McNeil
    OP
    Rental Property Investor · Boise/Portland · Member since 2017 · 709 posts · 742 votes
    8y

    @Uwe G. 

    I started investing in SFHs 10 years ago. My portfolio isn't as big was many of the other BP investors (I'm on my 6th SFH). I'm actually from Oregon and I started by doing comparative demographic studies for Washington, Oregon and Idaho that included taxes, cost of living, current rental rates, job market, etc. by looking at stats available online. Idaho came out on top by a large margin and I'm very happy with how our investments have done. Regardless, however, every market has its respective potential and upside, but it's up to the investor to carefully crunch their numbers and be as objective as possible without "losing themselves in their spreadsheets."

    Yikes, here I am sounding like an expert which I’m not, but I’ll use that as a lead-in for my next comment. Honestly, it’s not my wisdom or investment skills that helped me become successful with my investments. Rather, I give credit to a team of professionals who have given me excellent counsel and advise; my attorney, my real estate agent and my property manager. I have never made a move without proactively seeking out their honest advice, and they’ve helped me dodge a few bullets and pointed me in the right direction – all of which have paid off.

    As for “main drivers” you mentioned.I think its important to consider an amalgamation of additional drivers that include good schools, infrastructure (is the county planning and building for growth), local government policy, and economic cycles. And, it would be a mistake in today’s world not to study what Millennials are desiring. Finally, we only invest in newer properties less than 10 years old. Two main reasons which I’ve learned over time; maintenance budget is much less and you can get better quality renters able to pay higher rent.

    1Reply
  • Tommy Sessions
    Caldwell, ID · Member since 2016 · 62 posts · 25 votes
    8y
    There are investments to be had. I know if multiple multi units that are not on market that the owner would like to sell. Now keep in mind that these are not “motivated” sellers. They cash flow and would be good long term. They are all in the Caldwell market which is a good rental market and the college keeps growing and Caldwell is offering great business tax breaks causing large business to look. Just another opinion.
    0Reply
  • Uwe G.
    Vancouver, WA · Member since 2014 · 127 posts · 60 votes
    8y
    Matthew, that is really good advice all around and I like the comment in the last paragraph which focuses on higher quality homes fetching higher quality tenants.  That is great advice!

    Originally posted by @Matthew McNeil:

    @Uwe G. 

    I started investing in SFHs 10 years ago. My portfolio isn't as big was many of the other BP investors (I'm on my 6th SFH). I'm actually from Oregon and I started by doing comparative demographic studies for Washington, Oregon and Idaho that included taxes, cost of living, current rental rates, job market, etc. by looking at stats available online. Idaho came out on top by a large margin and I'm very happy with how our investments have done. Regardless, however, every market has its respective potential and upside, but it's up to the investor to carefully crunch their numbers and be as objective as possible without "losing themselves in their spreadsheets."

    Yikes, here I am sounding like an expert which I’m not, but I’ll use that as a lead-in for my next comment. Honestly, it’s not my wisdom or investment skills that helped me become successful with my investments. Rather, I give credit to a team of professionals who have given me excellent counsel and advise; my attorney, my real estate agent and my property manager. I have never made a move without proactively seeking out their honest advice, and they’ve helped me dodge a few bullets and pointed me in the right direction – all of which have paid off.

    As for “main drivers” you mentioned.I think its important to consider an amalgamation of additional drivers that include good schools, infrastructure (is the county planning and building for growth), local government policy, and economic cycles. And, it would be a mistake in today’s world not to study what Millennials are desiring. Finally, we only invest in newer properties less than 10 years old. Two main reasons which I’ve learned over time; maintenance budget is much less and you can get better quality renters able to pay higher rent.

    2Reply
  • Chrissy Parsons
    Specialist · Branford, CT · Member since 2018 · 222 posts · 121 votes
    8y

    @Matthew McNeil, taking the advice of @Julie Marquez I ran a report for zips along I-5 between Olympia and Vancouver and found over 9,000 Seniors with 15+ Year Residence and homes valued $50-250,000. If it's true that they are spending a lot on education, these folks might want to move away from the high taxes, downsize or transition to assistance. 

    It would be a good list for a seller mail campaign.

    97018 - COLUMBIA CITY, OR 24
    97048 - RAINIER, OR 336
    97054 - DEER ISLAND, OR 27
    98522 - ADNA, WA 10
    98530 - BUCODA, WA 43
    98531 - CENTRALIA, WA 1211
    98532 - CHEHALIS, WA 974
    98538 - CURTIS, WA 25
    98539 - DOTY, WA 24
    98542 - ETHEL, WA 38
    98544 - GALVIN, WA 13
    98565 - NAPAVINE, WA 79
    98570 - ONALASKA, WA 193
    98579 - ROCHESTER, WA 508
    98581 - RYDERWOOD, WA 28
    98589 - TENINO, WA 335
    98591 - TOLEDO, WA 200
    98593 - VADER, WA 81
    98596 - WINLOCK, WA 340
    98611 - CASTLE ROCK, WA 469
    98625 - KALAMA, WA 224
    98626 - KELSO, WA 1191
    98629 - LA CENTER, WA 178
    98632 - LONGVIEW, WA 2067
    98642 - RIDGEFIELD, WA 97
    98645 - SILVERLAKE, WA 65
    98674 - WOODLAND, WA 285
    98685 - VANCOUVER, WA 147
    98686 - VANCOUVER, WA 54
    Total 9266

    2Reply
  • Andrew Hodgson
    Real Estate Broker · Olympia, WA · Member since 2016 · 79 posts · 55 votes
    8y

    Hi @Matthew McNeil, There's something to be said about capital cities, too. Take Olympia for example, talk about stability... do you see all those government offices and the hordes of state workers? Plus hospitals, medical offices galore, colleges, and good schools mean lots of potential renters/buyers. Seattle can take the flash, we will keep stability.

    Actually, residents from the super-expensive Seattle metro are being pushed father out (both north and south), and Olympia is seeing some benefit from that as well. So maybe flash isn't everything. (Try paying rent with flash in Seattle...) 

    So yeah, I'm tooting my own horn a little bit because I live here in Oly, but hey, it's got a lot going for it!

    1Reply
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