Why invest in Maine?

Maine is a fairly overlooked place; we’re known for lobsters, cold weather, lighthouses, and moose. But real estate investing? Most folks associate that with areas such as Florida, Texas, New York, Massachusetts; in general, more heavily populated and urbanized metros.

However, I’m of the mindset that NOT being on most investors’ radar is exactly what makes Maine such a good opportunity for those of us aware of it. Here are a number of reasons why:

1. Property values are low. Outside of the greater Portland area, most of Maine has relatively affordable housing. At the time of this writing, you can find a solid starter home in Oxford and Androscoggin Counties for well under $300,000.

2. Low cost-per Rental Unit. The (relatively) affordable nature of much of Maine also carries over to multifamily; again, don’t go by the inflated Portland-area, where a duplex in the Munjoy Hill neighborhood can go for ~$500k/unit. Instead, look in less densely but still alive-and-well areas, like Norway and Paris/South Paris, Livermore and Livermore Falls, Winthrop and Gardiner, etc. It’s in these pockets of more affordable areas where you can strike an excellent balance between properties that will appreciate over the long term, and also realize excellent cashflow in the near-term.

3. Long-term Population Growth. The Maine Population Outlook showcases that Maine will likely see nearly 3% population growth from the years 2020-20230. Citation here. This is despite Maine being a demographically older state, and a high percentage of the population retiring/moving away and/or dying over the next several years.
   
   To reiterate: Even with the elderly population being accounted for, Maine expects its population to grow over 2.5% by 2030. As we all know, when you have more people flocking to one area, property values increase. We may be seeing real estate values increase to the point where Maine is no longer any more affordable than some of the more popular investing states mentioned previously. For this reason, I see the current environment as even more of an opportunity to investors that buy in the near future.
   
   That is, by buying now while values are low, and knowing that property values will increase as population grows, we can expect to see solid returns in the form of real estate appreciation in the next 1-2 decades.

4. Rents are strong. Market rent in Maine - even in more rural areas, such as West Paris, where I own 3 of my own buildings - is somewhat high. This is driven largely by the fact that housing supply is limited, and the alternative would be for a tenant to buy their own home, which is largely unrealistic for many of them. Without delving into the moral side of things, it is what it is; even if fellow landlords adopt my methodology of discounting rent to tenants by 10-15% below market value, that rent is still stronger than many other low property value states such as Illinois, Idaho, and Indiana. Like it or not, rent in Maine grew substantially through COVID, and is not likely to decrease much, if at all over the foreseeable future.

5. Investors are overlooking good properties. I see this all the time, where investors gloss by a property and the result is that it sits on the market for 60, 90, or even over 100 days. Sometimes this is because the listing agent doesn’t upload a profit and loss statement, or worse yet, uploads incorrect numbers (I’ve seen this more than 3 times in the last 6 months). Sometimes it’s because an investor analyzes a property based on under-market rents; I’ve gotten used to seeing most properties on the MLS having rents at 40-60% of what the landlord could be charging. Whatever the reason, even with limited inventory, I’m still seeing lots of good, cashflowing properties sitting on the market for months.
   
   This is a golden opportunity for the rest of us to come along and make offers at less than asking, or get creative with terms - such as getting an owner to seller finance to us because they want out and haven’t had anyone else come along and make them a similar offer.

6. Interest rates don’t (necessarily) matter. This is a touchy subject for a lot of people, and one that isn’t super specific to Maine. However, I think it’s still worth talking about.
   
   My approach to the entire topic is this: If a property cashflows even with interest rates being so high, it will cashflow even better later on after rates come down and you refinance to a lower one. In my opinion, it doesn’t make sense for someone to wait to purchase a property, when that breaks even or even produces income.
   
   As a matter of fact, with rates being so high right now, it actually makes for a great buying opportunity for those of us who are willing to stick it out with a less-than-ideal rate for the next 1-3 years.

In summary, much of Maine provides a great opportunity when it comes to real estate investing, through its combination of likely future appreciation, immediate cashflow, and is ultimately a great entry point for new and seasoned investors alike.