Boise’s Turn to Shine

With an average of 234 days of sunshine a year, Boise has begun to shine in other ways as well. Residents and investors alike are attracted by the …

With an average of 234 days of sunshine a year, Boise has begun to shine in other ways as well. Residents and investors alike are attracted by the weather, recreation, sports, job opportunities and family friendly atmosphere. Boise offers strong job growth in diverse industries and a pro-growth government with tax structures that benefit businesses and investors.

Limited land supply, increased demand and rapid appreciation have attracted investor and media attention in recent years. In 2005, Forbes and Inc. magazines highlighted Boise as a hotspot for business and careers. Money magazine ranked Boise as the eighth best place in the nation to live in 2006.

Boise has clearly begun to make a place for itself on the national stage. Local experts believe the area offers strong future potential as the rest of the nation continues to discover Boise’s attractions.

Pro-growth policies

Both state and local governments are pro-growth, Jeff Brown, a Boise investor and real estate investment specialist with Brown & Brown in San Diego, said.

“We have some awesome city planners here that are continually striving to get major employers into the area,” Mike Butler, a local John L. Scott agent and real estate investor, said.

Hewlett Packard, Micron, Boise State University, Albertsons and the state government are among some of Boise’s major employers.

“Boise is a hub for technology and the financial industry, and it seems to be a hotspot for the entrepreneur and small business startup,” Kris Miller, a loan officer with Eagle River Mortgage and a Boise real estate investor, said. Call centers and hospitals are also big sources of employment.

Boise’s unemployment rates are remarkably low. “The numbers that came out in March for our unemployment were at 2.7 percent; that’s a record low unemployment rate,” Furqan Mehmood, a local RE/MAX agent and investor, said.

Favorable tax structures, low cost of workers’ compensation, inexpensive power and low average wages are attracting businesses, Mark Bitton, a Pocatello real estate agent and investor, said. “A lot of companies…are looking at Boise and Idaho in general.”

Cheap commercial space, affordable housing and low cost of living make it easy for companies and their employees to relocate to Boise, Mehmood said.

American City Business Journals ranked Boise as the third strongest labor market in the nation in March 2005.

Idaho is “always in the elite of the job producing states, and Boise is in the elite inside Idaho for producing jobs,” Brown said. “They have a tremendous diversity of employment.”

Quality of life

U-Haul ranked Boise as the top growth city in the nation in 2004. “We’ve had people moving here in droves,” Ed Elam, a Boise real estate consultant and investment specialist, said.

Residents “like the family atmosphere, the employment is pretty much a lock, they love the entire outdoor recreation…and they love the fact that it’s still not cluttered,” Brown said.

“People are trying to get out of these fast-paced areas, and they want to move into a better lifestyle,” Boise real estate agent Leigh Wilson said.

“We’re a very, very attractive community from a standpoint of quality of life,” Phil Hoover, a broker/associate with RE/MAX West in Boise, said. “We really don’t have much crime here, and the weather’s good.”

Farmers Insurance ranked Boise as the nation’s most secure large metropolitan area in 2006. The study considered “crime statistics, extreme weather, risk of natural disasters, environmental hazards, terrorism threats and job loss numbers.”

A pleasant, sunny high desert climate, a greenbelt and a river running through town and outdoor opportunities attract residents, Elam said. Affordability is another draw; property prices and cost of living are lower than the national average. New residents are “amazed at what you can buy,” Elam said.

“There is still a large differential between our average home prices and many other similar metropolitan areas,” Mark Ballard, an agent with RE/MAX West in Boise, said.

The area’s immigrant population is growing, which will generate a strong demand for entry-level properties, Mehmood said.

Boise is attracting people from other large cities, Butler said. “It’s natural that these folks are going to come in from the larger metro areas to change their lifestyle, have stress-free living and build our population over the next five to 10 years.”

Vibrant downtown

Five years ago, Boise didn’t offer much of an urban lifestyle, but as it grows, “we’re offering what the larger metro areas offer as far as downtown living, whether it’s theater, cultural events, entertainment, those sorts of things,” Butler said.

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As a metro area of approximately 500,000, Boise has big city entertainment and sports without the crime and traffic problems of many major centers.

“We have a vibrant downtown area…with a lot of nice restaurants,” Hoover said. “You feel safe when you’re down there at night, unlike many downtown areas in the country.”

“We have…lots of sports, we have the [Boise State] Broncos who won the Fiesta Bowl—that has just generated a huge buzz in our area…we’ve got baseball, we’ve got hockey, basketball, indoor football,” Elam said.

As Boise’s downtown grows, urban living is becoming popular. “We’ve just seen a huge explosion of downtown living, lots of condominiums being built downtown,” Elam said.

Overbuilding of downtown lofts and condos may become a problem, but “there is a demand for that; there are a lot of people that would like to live downtown and not be out in the suburbs mowing lawns,” Hoover said.

Established in-town areas

Boise’s desirable north end neighborhood features historic boulevards, small tree-lined streets, smaller bungalow-type houses and larger homes, Elam said. “Our north end is just ridiculous pricing because it’s very trendy and people want to be there.”

Because the north end is so expensive, mid-century subdivisions are “really having a rebirth,” Elam said. One of those areas is the Boise Bench, a neighborhood south of downtown that recently saw a surge in rehabs and flips.

The Bench is similar to the north end in character, style and architecture, but with larger lots, wider streets and more off street parking, Elam said.

“We kind of consider the Bench our next north end,” Wilson said.

Flipping opportunities in the Bench and throughout Boise have become scarce, most experts agree. Many flippers “flooded in” from California in 2005 and found excellent deals, but the best opportunities have already been taken, Hoover said.

Southeast Boise is home to Boise State University, so it boasts a strong rental demand and downtown access, Mehmood said.

Although the southeast is “tremendous,” the condo boom there may not offer the best opportunity, Brown said. The southeast is good for long-term appreciation, but investors will pay a premium there, Brown said.

Limited land supply

Limited land supply is a key factor in Boise’s appreciation. “We have a number of very prominent, local, well-established developers who have optioned up land in the path of progress,” Hoover said.

“The growth is pretty much forced into areas with infrastructure…it’s not easy to go outside the city limits and buy an acre or two and build out in the country,” he said. Opportunities to purchase land are rare, and competition and prices are high for those that arise.

Agriculture is a big part of Boise’s economy, so counties and cities are protective of the fertile land in the area, Mehmood said. Much of the land surrounding Boise is publicly-owned open range land that is protected from construction, he said.

The Boise foothills to the east have strict limitations on development, Butler said. The foothills are protected by city and public entities, and only a small amount of development will be allowed.

“Our city planners don’t want our foothills to just be full of homes; they want to keep its value for walking and hiking and mountain biking and just the way it feels when you’re down in the city looking up at the hills,” he said.

Investment strategies

Single family and small multi-family properties offer the fastest appreciation, with single family outstripping the rest, but small multi-family properties typically offer better cash flow, Brown said.

Duplexes and triplexes are difficult to find, and competition is high, Hoover said.

Competition for rehabs and flips has grown, particularly in the most desirable areas. “The days of the fix and flip are pretty much over…you need to buy a property right and hold it for a minimum of a year to two years,” Butler said.

“The areas that would be great for rehab would still be the north end, the Bench area…any of the places with older houses,” Miller said.

Nampa, southwest Boise, the Bench and areas near Garden City may offer rehab opportunities, according to Brown.

Butler said he has experienced success with an infill housing strategy that involves purchasing a large lot and building row houses.

Cash flow can be a successful strategy in Boise. “In a lot of cases, the returns in Idaho are…much higher than what you’re going to find in a lot of the more urbanized areas around the country,” Bitton said. “Here it’s not uncommon at all to get a 7 to 8 percent cap rate whereas for example in a lot of areas in California…they’ll be marking a 3 percent cap rate.”

Bitton said he likes commercial properties because it’s a riskier quadrant with less competition, so sellers are more compelled to negotiate and work with the buyer.

Commercial project financing is expensive, but returns can more than offset that, particularly for commercial buildings that are 50 percent or more vacant, according to Bitton. “You’re able to go in for a lot better price per square foot than you would be on a fully leased out type of a building.”

Ministorage warehouses are a commercial strategy with nice cash flow and strong demand, although they are more expensive investments, Brown said.

Future trends

Retiring baby boomers will likely be attracted to Boise’s senior living communities, Butler said.

Demand for homes with raised roof carports for RVs should increase, and patio home communities could become popular as retirees make up a larger demographic in Boise, Brown said. “I think that’s going to be one of the real coming places to make money and invest in.”

Foreclosures are another trend many experts expect to increase in the near future. Foreclosures have been rare in Boise in recent years, but national market changes and subprime lending issues may change that.

“We anticipate that…in the next year or so that number [of foreclosures] is going to grow significantly,” Wilson said.

Increased attention

Boise’s main risk is the attention it has received; recent national publicity sparked interest in the area. Boise “went from not being on the real estate map to at least joining the minor leagues. And values jumped accordingly,” Ballard said.

In spite of this, Boise is still relatively undiscovered, Hoover said.

The market has moderated after its rapid appreciation, but “we seem to be escaping the carnage that is going on in some of the other overblown markets around the country,” he said. “I’d say we’re in a buyer’s market but…not a severe buyer’s market. There are good deals to be had but not a lot of desperation.”

Overbuilding may be a risk with certain properties, particularly condos downtown and in the southeast. High end construction may also exceed demand, Mehmood said.

However, the fact that Boise has no national builders is a positive sign, Hoover said.

In light of the recent investment frenzy, many developers and builders are limiting the percentage of investors in a community to a 10 percent maximum, Butler said.

This slowdown period in which the national real estate market pauses may prove to offer some of the best opportunities in Boise, Brown said. “You know, I think we’ll look back historically and say that buying in 2007, 2008 was when you should have done it.”

“I feel that now is the best time to purchase, even better than it was two years ago, before all these big gains,” Butler said. Today’s market has less frenzied investor competition, and “I don’t see that we’re going to have a better time to purchase,” he said.

Five or 10 years from now, Butler said he expects that “people will look back on today’s prices in Boise and just shake their head and wish they purchased more.”


 

Towns with potential! Map of Idaho, Boise marked in Southwest region

Some of the most attractive investments lie in Boise’s western suburbs, particularly Canyon County, where the infrastructure is growing and employers are moving, Mehmood said. “To maximize your appreciation, that is where you’ve got to be. You’ve got to be in the path of growth.”

Towns west of Boise include Meridian, Eagle, Caldwell and Nampa. Meridian and Eagle are high end areas with prices rivaling Boise’s north end.

Caldwell and Nampa offer more affordable prices, making cash flow easier and appreciation likely. Properties can be found there for $120,000 to $160,000, Mehmood said. Prices can be $60,000 to $80,000 lower than in Boise, but rents are not much lower, he said.

Nampa “is going to be the next big growth area because it’s so much lower priced” than Boise and is “only 10 to 30 minutes from all the employment,” Brown said.

To the southeast, Mountain Home offers a compelling cash flow opportunity, Butler and Miller agreed. The town has a 0 to 3 percent vacancy rate, rents comparable to Boise and stable employment, Miller said. Major employers include a cheese factory and an Air Force base, and Boise is just a 25 to 30 minute low-congestion commute away, Butler said.

Marsing, roughly 45 minutes to an hour from Boise, is becoming a new wine country, Miller and Butler also agreed. “There are some amazing developments that are in the starting phases…of preliminary approval that have great master plans,” Miller said.

Investors can still find great deals on land parcels surrounding Marsing and can “hold those parcels of land, some of them even rent back to a farmer and create some cash flow, and wait for that development to take place,” Miller said. “That land value is going to appreciate amazingly over the next five, 10 years.”

Additional Information: Boise Resource List, Boise Service Provider Directory

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