Buy and Hold in Maine - Seeking Advice

[Mike Roy]

Hello - I'm looking to buy my first multifamily rental in the spring/summer of 2015.  I live in Boston but grew up in Midcoast Maine and am interested in investing there because I'm familiar with the area, I think I can achieve 20-25% cash-on-cash in "B" towns (including professional management), and the the location is reasonably accessible to scout for properties and periodically visit them.  Based on the numbers, it seems that 2-4 unit properties in the $75k to $150k fall into the cash-flow sweet spot.

I am interested in Bath, Brunswick, Waterville and possibly Bangor as target areas.  Are there other towns that you might recommend looking at where you've had success?  Have any of you invested much in Lewiston, and are the risks of that area worth it?

Also, while I am considering pursuing a real estate license, I will work with an agent in the early going.  Can any of you recommend a good buyers agent in or around my target towns?  How about a good property management company?  It is a huge priority of mine to build a good network since, most of the time, "I can't get there from here."

If you have any general advice about investing in Maine, or anything relevant to add, I would sure appreciate it.

Mike

[Eric Danielson]

@Mike Roy I grew up in Central Maine and live in Topsham now. Personally Topsham/Brunswick and south is where I'm more confident to put my money. When I moved back from California a couple years ago I had similar thoughts on returns.  I'm not sure your financial situation but if you're talking about about buying w/ cash then IMO you're being very optimistic, leveraged might be more possible. Buy right and there are very good returns out there.  As I'm sure you already know a lot of the multi housing stock we have in this area is old, very old...originally built for the workers in the mills, so 100-200 year old properties are very common.  Here's some things I'd suggest you strongly consider but not limit your diligence on a property too:

1. Maintenance Costs:  Many old buildings have great bones but can have a lot of deferred maintenance and older systems.  You still may run into asbestos and will definitely run into lead paint.  Is the heating system sufficient? Is it ancient? Electrical up to code? Hard wired smokes? Cosmetics? With an old house you never know what you're going to get...

2. Vacancy Rates: Depending on the area vacancy rates can fluctuate a lot.  Brunswick/Topsham down I295 to Portland has really strong demand, Waterville, Augusta, Lewiston can easily have 12-15% vacancy rates, Bath seems to have a lot of foreclosures and vacancies which I don't full grasp bc BIW is doing well.  

3. Energy Costs:  How is the building you're looking at heated?  What's the energy source? Do the units have separate utilities? What's the condition of the boiler/furnace? How is hot water distributed?  A lot of the older buildings are like chimney's where the cold air rushes in through the leaky foundation then pushes all the warm air out the top. From a landlords perspective that can be your cash flow disappearing literally into thin air...it's common for rentals to include heat/HW for many reasons, some being tenants like it (maybe more important in high vacancy areas), let's you as the landlord sleep better on those bitter cold January nights, or with one heating system you may have little choice in the matter.  There is a lot you can do to address energy costs but I'd recommend doing your diligence. 

Please understand I'm not trying to discourage you from this area, just sharing some of what I've learned over the last couple years.   The Southern Maine Landlord Association has some good info that might help with your diligence too http://www.smlamaine.com/  http://www.mereda.org/  publishes market reports that can give some insight.  Efficiency Maine does offer rebates and programs for making buildings more energy efficient.

My real estate agent recently went in another direction in his career so I'm thinking it might be time to get my license. This is a small market that doesn't support many full time agents. I've seen Rob Whisenant's signs up around Brunswick and although I don't know him he seems pretty active.