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

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

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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 

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…

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.