All Forum Posts by: Katie Magoun

Welcome! Sounds like you have the right attitude and a great idea in getting some experience through networking with active investors. 

Now is a perfect time to be squirreling money away to use when the market around here inevitably dips. I think if you do your diligence and develop the strategy you want to take (house hacking with FHA? partnerships? etc), you'll be ready to strike when the iron's hot.

Good luck! 

I'm a coastal Maine resident, property owner, and investor. A few points about this market specifically: 

Some areas of coastal Maine are becoming year-round destinations. We don't invest in STRs personally, but those I know who do cite an unexpectedly full calendar, even in the so-called off season. This is primarily happening in Portland and surrounding coastal towns as the city increasingly becomes a mecca for foodies and beer drinkers. We're also seeing a steep increase in the number of people who want to move to Maine and need more short term housing while they look, and empty-nesters who are downsizing, but not ready to leave the area. That said, price to buy in these areas is high, and both Portland and South Portland are feeling the pressure to regulate the STR industry, so be aware of the local politics in whatever area you choose. Most other areas will see the most traffic in June, July, August, and September, but expect it to be pretty slow for the remaining months of the year. I've read to plan for about 70% vacancy over the course of a year, and I think that's a reasonable way to estimate it in those highly seasonal markets.

The other point I would make is one of maintenance. Those who don't live on the coast are rarely aware of the cost to maintain a property exposed to regular salt air. I'm not sure where you're looking, but areas south of Portland are increasingly vulnerable to extreme weather -- flooding, beach erosion, and structural damage impacted many southern coastal towns this past winter. 

Good luck! I love coastal Maine. Nowhere else I'd rather be! 

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. 

Hi @Corey Keller. My husband and I are investors in the Portland area. Weekends are pretty busy on our end, but feel free to send a message if you'd like to plan something. We're always happy to chat real estate! 

I'd include the 10% management fee in your analysis personally. Unless you're destined to open up your own PM business, you are almost certainly going to want to hire one eventually. 

Are you planning to owner-occupy? That makes managing it yourself much easier, but if you're not, some of your cost estimates are low. For example, I read "Large lot with nice yard..." and think "ca-ching, ca-ching."  And the cost of heating the building can vary widely from year to year. If you're paying for heat, it matters that the windows are replacement, roof is insulated, etc. And expect that tenants who aren't paying for heat will crank it up to 80+ and crack the windows if left to their own devices. So I'd budget for at least $3k to be on the safe side. Again... some of these extra expenses are mitigated if you owner-occupy. 

$3000 for closing costs seems low. I suppose it depends on who you hire to do inspections, and which ones you do. I'd budget 5% of the purchase price ($4500). 

We also include incidentals like accounting fees,  and legal fees (our properties are owned in LLCs), but those might not be expenses that you need to incur with your first property. 

We have a friend in REI who says that he doesn't expect his properties to cash flow in the first year. We chuckled at that when we were brand new, but the reality is that he's right more often than not. There are always start-up costs that are difficult to foresee (are there existing tenants? our experience has been that about 50% of those inherited tenants work out, and the others don't... to varying degrees of expense. Does the inspection reveal something that isn't imminent, but needs to be dealt with soon? do you need to upgrade the thermostats so your tenants can only raise the heat to a certain level? etc, etc, etc.).

Expect that your first purchase analysis will be off. You'll learn a lot with the first few, and like those who have been doing it a while, your analysis will get better with each acquisition. Just err on the side of caution and skew your first few on the conservative side. 

It's pretty simple. Demand = supply. Look to history to see where working-class populations condensed into cities with strong working class industry during industrialization (late 1800s to early 1900s). I can speak to Maine history and say that where you see multis in Maine... mostly in areas with mill work (paper, textile, canneries, etc.). As @Ryan Murdock mentioned, most multi housing stock in Maine is older single families that were long ago converted to multi-family buildings to support the demand for affordable housing near the mill work. I imagine the story is similar in most areas of the country. 

Welcome @Nicholas Olson. Commercial fisherman are some of the hardest workers I know, and that mindset will serve you well in REI for sure.

One thing I wish I'd known at the beginning: spreadsheets, and calculations, and all that are based on assumptions. The good news is that your assumptions will getting better with time and experience. The bad news is that sometimes you have to learn the hard way that your assumptions are off. I guess this is a long winded way to say: keep your expectations low for the first few deals. This market is tough, and making money can be a challenge. I look back at our first REI deal and I'm thankful for the value we got from learning some tough lessons, but at the time, that deal didn't exactly work out the way we thought it would when we ran numbers.

I agree with @Tammy Richards. The market is smoking right now (Portland area multis are up over 12% last year!). Given that real estate cycles tend to run 10-15 years, and the last downturn was in 2008/2009, we're probably looking at another downturn in the next 5 or so years. We're still buying when it makes sense, personally, but very few deals make sense. 

Not sure what type of real estate you're interested in, but I'm starting to think that STRs are the best way to make money in our coastal Maine market. 

Welcome! 

I agree with others that BiggerPockets is great, but remember that action is key, particularly in this market. 

Good luck! 

Welcome! 

Portland market is nutty, no doubt about it. Anything solid within striking distance of reasonable typically has an avalanche of offers. FHA financing may make it even harder to compete in those instances, so I agree that it's good to consider fringe markets.

I'm a big fan of Westbrook -- IDEXX just announced a huge expansion, and Maine Health is moving 500+ jobs there as well. Biddeford/Saco is great, too. Lots of investment going into these communities, but you can still get a good building at a price that isn't hyper-inflated (see Portland). You're doing the right thing by figuring out the financing piece now. The inventory is low in all these areas, and when your building pops up, you'll need to be able to act quickly. 

Not as familiar with FHA financing, so I'm not much help there. There are some good landlord groups in southern Maine. Southern Maine Landlord Association and Southern Maine Real Estate Investors Association both come to mind (you can search for them on Facebook).

Is this a business trip or primarily pleasure? I ask only because 4 days isn't all that long to see the sights AND do REI recon.

The Portland area is fabulous. There is great food, excellent beer, culture, and plenty of scenery nearby. You could easily spend 4 days in Portland, even in the winter. 

Bangor is 2 hours north (assuming the roads are good!). I like Bangor, but if I'm driving that far, I'd rather check out MDI/Bar Harbor/Acadia. Again, you could spend 4 days up there, even though it's pretty sleepy this time of year.