As we head into winter and landlords try and embrace the often roller coaster ride of heating costs and frozen pipes I thought I would provide a quick snapshot of the current multi unit markets and attempt to put them into context with recent year sales.

The multi unit market of Portland Maine has held its value SIGNIFICANTLY better than any of the other markets in the region.  To date 77 units have sold in 2009 at an average price point of 292K compared with an average price of 302K in 2007.  Contrast this with the worst performing market of Biddeford that saw an average price of 133K in 2009, compared with 221K in 2007, wow!!
The mid coastal markets of Bath and Brunswick currently have 36 multi units for sale  offered at median prices of 157K and 198K respectively.  In 2009, a total of 17 units sold at significantly lower median prices of 155K and 144K on average.
To read the full Southern Maine Investment Report, please visit my site www.mymaineproperty.com and sign up for an Investment Package or simply shoot me an email at john@greentreemaine.com or call me anytime at 207-650-5383.
Thanks for reading,
John

The verdict is in once again, 48th out of 50 on best places to do business. Well at  least it can’t get much worse.  The only states outranking us were Louisiana and West Virgina.  Coming as no big surprise since as 2 years prior we tallied a 46th ranking in the same pole.  Broken down into 5 categories, the one area we did rank in the 25, a 16th in quality of life, so just because nobody wants to do move their business here, plenty still want to relocate and retire in Maine.  We ranked 27th on labor (educational attainment, net migration and projected population growth), 30th in economic climate (current job, income and gross state product growth, unemployment and the presence of large employers), 42nd in growth prospects (projected job,…income and GSP growth, business openings and closings, and venture capital investment), 43rd on business costs (labor, energy and taxes) and  we bottom out at 46th on regulatory environment (regulatory and tort climate, incentives, transportation and bond ratings) 

Oh well, the Maine Lobster will have its day.. Read the complete story here

Inventory, Pricing, Demand
Statistics for April show the continued trends of rising inventories yet increasing prices, a quandary for traditional Supply/Demand economics.  Prices were up in 3 out of the 4 counties followed with a 6.7% increase in Cumberland.  The number of properties sold increased in Lincoln and York, remained flat in Sagadahoc but saw a strong decline in Cumberland partially attributed to the Portland younger buyer’s inability to secure loans due to increasingly stringent lending practices for higher risk financing.  A general sense of “blah” seems to have clouded the markets in April, yet investor and consumer sentiment seem to point toward improving market conditions for late spring. 

Read the entire Maine Newsletter here.

Trying to think what interests people and having just done a bike tour searching out multi units in and around the East End of Portland, the love of food coupled with the desire for lucrative investments in Maine real estate  I thought perhaps a brief commentary on how I feel the local region surround the behemouth will fare over the coming years was a good subject for conversation. Driving down 295 one can’t help but notice the beacon of development Whole Foods represents.  Coupled with the newer Planet fitness next door, the Back Cove a stones throw away and the push of the city to redevelop the bayside area, the real estate, although a little rough around the edges has great potential I believe.   The brick warehouses on Kennebec streed I envision as loft condos, the single family and duplexes on streets such as Alder, Oxford, Chestnut, Hanover and Elm to name a few, shall be bought, renovated and brought back to their original splendor and  the removal and infill of the local junk yards and city of Portland public works buildings will bring larger mixed used retail, commercial and residential proprety. The area is ripe for improvement,  keep an eye on it. 

As the residential real estate markets continue to undergo tumultous times, what has been happening in investment properties in Maine. In Portland the current inventory of multi units has grown to around 90-95 properties after hovering around 80 to 85 for the past many months.    Here are some recent statistics on the current inventory levels and pricing of smaller mulit unit properties on the  East and West end.

Current Inventory levels as of 5/15/07

                                           East End  
               Total    Avg List Price      Per/Unit       DOM
 2 Unit        4            276                 138               110
 3 Unit        7            397                 132                38
 4 Unit        4            421                 105                41
 5 Plus        3                                  100 
     
                                             West End  
            Total       Avg List Price       Per/Unit          DOM
 2 Unit      8             349                    175                 110
 3 Unit      5             334                    111                  38
 4 Unit      4             414                    104                   41
 5 Plus      7                                        83 

The Numbers, its that simple!

A sample balance sheet for a 3 unit complex

Purchase Price:                        300K
Down Payment:                       60K    20%

Income:
     Rents                                 800
1000
1100
coin op laundry                    150
Rental Income                       $3050  (Monthly)
Minus Vacancy/Reserve (10%)  -$350
GROSS RENTAL INCOME        $2700
yearly                            $32,400

Expenses
Water/Sewer                   $2000
Common Electric              $300
Heat                               $3000
Maintenance                    $1000
Property Taxes                $2500
Insurance                       $1000
Total Expenses:                       $9800

Net Operating Income:         $22,600

Debt Service:
7% 30 year loan:                     $19,160   ($1600 month)

Cash Flow Yearly                   $3,440

What does this all mean?  Well the building would make you approximately $250 plus a month after all expenses, factoring a healthy vacancy rate and assuming you are putting down 20% of the purchase price.  Is this a good investment?  The key ratio to look at is the Cash Flow divided by the down payment (your equity) which in this example yields a 5.7% figure, meaning that your money invested is earning a rate of return of 5.7%, better than what your bank will offer, but worth all the headaches of managing the building?   With that said, investing in the right markets for an extended period of time will more than likely give you some appreciation not to mention the  the beneficial tax depreciation one will realize while also looking for ways to boost income while reducing expenses can siginficantly sweeten the deal.  For example if one transferred the heat cost on to the tenant, cash flow would double as would your ROE to 12%.  Thanks for reading…

First off my apologies for such a delayed response in getting this next entry out.  No excuse but for out there on the front lines making the billions.  Also been working to get my associate brokers license, a 64 hour course twice a week for 8 hours a time that seems to have put a squeeze on trying to fit everything else in….

Where to look, how to determine appropriate pricing

Where are the markets?  Greater Portland and Lewiston/Auburn I would classify as the A regions, each with well over 150 buildings on the market.  B areas worth investigating would be Bath/Brunswick, greater Augusta and the greater Bangor regions with each areas having 50-75 units or so on the market.

The biggest issues with smaller multi’s are making the numbers work and figuring out what the actual numbers are as records kept by owners, if they exist at all, are generally not accurate.  Property taxes and utility expenses are continuing to spiral upwards at rates much faster than rental rates are rising as well. Heat is such a huge swing variable, it generally makes or breaks a deal based on whether the tenant or landlord foots the bill.

So…looking at buildings, first thing I do is figure out what the average cost per unit for a given area and size of a unit is, for example in Gardiner the average cost for a unit seems to fall around 30-40K where in Portland the cost is closer to 100-150K now rental rates in Gardiner range around 600 with heat included for a 2 bedroom whereas in Portland the rent can be as high as 1200 with the tenant paying for heat. Knowing the market, checking past solds, and consulting with experts is essential.

After getting a rough idea of cost/unit and having my list of buildings I am interested in I will begin making additions and subtractions to the buildings cost/unit based how much deferred maintenance there may be or how well the building has been cared for.

The 3 primary categories are structure, systems and cosmetics.
Structure – the roof, siding, foundation, basement condition, windows, insulation, etc.
Systems -  Heating, plumbing and electrical systems.
Cosmetics  – Bathrooms, Kitchens, floorings, wall coverings, common areas, landscaping, etc.

After making the rough adjustments I then have a much better sense of if the building is priced appropriately, I will also make a spreadsheet of the various items and their estimated useful life remaining and what it will cost to fix/upgrade when the time comes,  you will be surprised how quickly the costs on this list add up!

Next part – expenses and running the numbers.