If you are looking to start or expand your real estate portfolio, New Hampshire has a lot to offer. Real estate is considered one of the safer ways to invest, however, that doesn't mean it is always a secured deal. You have to consider all the current market trends, investing strategies, forecasted growth and the overall economy to make the best choice for you.
However, keeping an eye out for possible investment options is always a good idea. That is why we want to share with you the benefits of investing in multifamily properties and all the advantages of New Hampshire's market.
The 3 biggest reasons to invest in Multifamily real estate
Multifamily properties are buildings with more than one separate rentable space that are not used for commercial purposes. The term refers to apartment complexes, duplexes, condos, townhomes, etc. These are living spaces that have more than one housing unit, with each unit having a kitchen, bathroom, and a combination of bedrooms and/or living space.
They provide a higher (and more secure) income source
One of the main benefits of this kind of property is a positive cash flow. You only need some of the rent to pay off expenses while the rest represents steady multiple monthly incomes. Multifamily is simply a safer real estate investment because of the number of tenants. If one unit has a vacancy, you still have others producing income, which is not the case with single-family properties.
You can also get more tax benefits with this type of property. For example, you can deduct from your taxes all maintenance costs, like operation, repair, property management, and marketing costs. You can also get a mortgage interest deduction, which is a tax incentive for homeowners, or a Property Tax Deduction.
They are easier to finance and manage
Although multifamily real estate is more expensive than purchasing a single-family home, it is often easier to secure a loan for this type of investment, as it's not a big risk for banks because of the mentioned predictability of their positive cash flow. Even if not all units are taken, there might still be residents who continue paying rent, so the multiple units work as a safety net for loaners.
Also, managing a multifamily property is easier than managing several single-family ones. It's all in one place and it justifies hiring a property manager, meaning a person or company that will run and oversee the day-to-day activities of your real estate unit. They can deal with the tenants, take care of the property, and collect rent (and their salary can also be deducted from your taxes against the income gener. When investing in real Estate, there are a lot of different strategies you can apply. That's why, while you are looking for a property, you need to keep in mind the sort of investment plan that you want to pursue.
Buy & Hold: If you buy a property with the intent of keeping it for a long time until you find the best deal to sell, that's a Buy & Hold. Some of the factors at play with this strategy are the appreciation rate of the property (an increase of its value depending on location, age & condition), the growth of the population in the area, tax raises, etc.
Long Term Rental: Also known as BRRRR (Buy, Rehab, Rent, Refinance, and Repeat). You buy a property, you make it ready to be rented out and then you refinance it after a period of time, usually more than 6 months. This is a good strategy but can be a little risky if you don't have that much experience. You will have to consider the renovation time and cost, the appraisal, and the time it takes to fill up the vacancy.
Short Term Rental: These are also known as “vacation rentals” and consist of furnished living space available for short periods of time. This is an easy strategy if you have an extra property in a popular destination for tourism. You of course will have to consider how attractive the area is, some additional taxes and local regulations and restrictions, on top of a little more work interacting with tenants and making sure everything's in place after every visit.
Fix and Flip: You buy a property that needs fixing or rebuilding for a lesser price and then you sell it for a higher market value. It's pretty straightforward, but to know if it's worth it, you will have to consider elements like the median home price in that area, the renovation costs, the population growth, income rate, and even the unemployment rates of the area.
There are more strategies like Wholesaling and mortgage investing, so you can look for and find the best strategy that works for you.
They diversify your real estate portfolio
Multifamily real estate is a relatively simple way for investors to build a large portfolio that consists of several rental units. Purchasing a building with various units is easier and much more time-efficient than purchasing several single-family homes. Investing in multifamily real estate is also more time-efficient since you could get a loan for just one property instead of several loans for different properties.
The 5 main reasons to invest in the New Hampshire real estate market
The tax policies
New Hampshire’s excellent tax policies are a reason why investing in this state is a great idea. New Hampshire has no income tax, no capital gains tax, and no state sales tax. There are also no inheritance taxes, no estate taxes and public and private pension incomes are also tax-free. Real estate investors often want to lower their overall tax burden, which makes New Hampshire a fantastic choice since you can avoid double taxation.
New Hampshire is known for its beautiful natural attractions. Mount Washington, White Mountain National Forest, Flume George, and Lake Winnipesaukee are just some of the breathtaking landscapes that you can find in the state. The mild summers, crisp and bright autumns, and snowy winters make New Hampshire one of the best places to live for people who love the cold. The average daily high temperature is only 54.3 F.
The Increasing rental prices
Rental prices are influenced by home values. Before, the real estate market in New Hampshire indicated that typically it would be more affordable to buy a home in New Hampshire than rent. However, this is starting to change. Rental rates have increased 13.3% over the last decade.
The growing population
Northern New England has a steady flow of people moving into the region. People from the New York metro area and the West Coast are opting to relocate to the area, s your expectations and your real estate strategy.
Pick a real estate strategy where home prices are comparatively lower. Places like New Hampshire offer larger homes, bigger green spaces, and outdoor amenities along with good education and employment rates.
All this attracts a lot of people, especially Millennials that are starting new families. The forecasts for people's growth in the city are optimistic and are something investors should always be on the look for.
There are several signs that indicate that 2022 and subsequent years will offer more and better options for homebuyers in New England. Interest rate increases may stabilize prices in certain areas, which is a good thing after the rapid rise of home prices. It is also expected for there to be a rise in the percentage of people who plan to sell their homes. No matter what area or neighborhood you are looking at in New Hampshire, rents have jumped from previous years, which is good news for real estate investors. There’s also little turnover in the rental market, given that there is an approximate vacancy rate of less than 1%.
Where to start?
Pick an investment market in New Hampshire
There is a reason why experts say that the three most important factors when buying or investing in a property are location, location, and location. It determines many of the most important factors on how valuable that property is going to be in the near and far future.
That's why you want to choose carefully. Each area is a market with its own trends and factors at play. Luckily in New Hampshire, you have many good ones to pick from:
Manchester: This is one of the largest cities in New Hampshire and has a lot of opportunity for growth, with a lot of jobs that are attracting new people. Because of this, it is one of the hottest markets and you will probably have very good returns. However, it can be risky given that it is one of the most competitive markets as well.
Portsmouth: This is a small city close to Boston and Maine, so it's great for commuters that want a quieter, more artsy lifestyle. The median home value is around $361,000, making it the second-best in all of New Hampshire.
Nashua: The second largest city in New Hampshire and its housing market has been growing consistently in the last years. This is a good area to invest in single-family homes.
Londonderry: This town has a population with a high median income and is expecting job growth in the next few years. Besides, it has a low crime rate which attracts families. Most of the people are renting so it's a great opportunity for investors of multifamily properties.
Hampton: It has one of the best condo markets in the area, and its housing market is not that far behind, with a lot of new construction happening. Hampton has a high household income, high education rates and low unemployment.
There are many more cities and areas to pick of course. You can consider Concord, Dover, Rochester, or any other, you just have to make sure the location of your property match.