Best investment strategy with $190K deposit

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Best investment strategy with $190K deposit

Lara Nicole
Member since 2021 · 23 posts · 20 votes

I'm trying to figure out the best investment strategy & I have up to $190K for a down payment. 

My company made $40K net profit in 2019 & much less in 2018. My net for 2020 is about $30-$40K but I haven't filed yet. I live in Portland, OR but the laws aren't landlord friendly at all. I definitely don't think buying a multi-family in Portland is wise but a SFH or townhouse could work.

Would it make more sense to buy a duplex in another state first then use the rental income to buy a smaller home in Portland? Not sure if there's a waiting period between buying two properties or the need to prove rental income for certain amount of time.

Or buy the duplex in another state using a conventional loan & use a bank statement loan for the 2nd Portland property purchase due to my lower income that will show on my 2020 taxes, without having to wait? 

My deductions on my 2020 taxes will show much less profit so a bank statement loan would get me a higher approval rate, although I would be paying a higher interest rate.

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Noah Chappell
Investor · Minneapolis, MN · Member since 2016 · 254 posts · 228 votes
5y

@Lara Nicole I'm feeling like your vibe is to get into some 1-4 unit properties. I'd consider using 20-40k for a low down payment house hack on a 2-4 unit property within Portland, then taking the remainder and using it for 20-25% down on a BRRRR or near BRRRR maybe an hour or so outside of the city where prices are lower. For the BRRRR I'd look for a decent property that would qualify for bank financing, not so distressed you need hard money, to get your head around the process for your first deal. I think starting with that you'll have plenty to keep you busy.

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  • Brad HammondBusiness Member
    Real Estate Agent · Portland, OR · Member since 2016 · 1k+ posts · 605 votes
    5y

    Hi @Lara Nicole, I think you should try and figure out what your goals are.  If you are looking for cash flow to use now then investing in the south or midwest might be your best option.  If you want appreciation for wealth creation, you might want to invest in other areas.  

    I can understand your hesitation to invest locally but take another look at investing in the suburbs or the outer areas.  Their landlord/tenant laws are not as strict. 

    There isn't a waiting period to be able to qualify for another loan, though a lender will want to see a P&L from the past 12 months or so.  
     

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  • Chace Fraser
    Realtor · Portland, OR · Member since 2017 · 357 posts · 259 votes
    5y

    Hi @Lara Nicole like @Brad Hammond figuring out your goals is the first step. And speaking to a lender to see what's possible might help you with that as well. A good local investor friendly lender is @Julee Felsman. She's on here but for some reason I can't tag her. 

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  • Noah Chappell
    Investor · Minneapolis, MN · Member since 2016 · 254 posts · 228 votes
    5y

    @Lara Nicole I'm feeling like your vibe is to get into some 1-4 unit properties. I'd consider using 20-40k for a low down payment house hack on a 2-4 unit property within Portland, then taking the remainder and using it for 20-25% down on a BRRRR or near BRRRR maybe an hour or so outside of the city where prices are lower. For the BRRRR I'd look for a decent property that would qualify for bank financing, not so distressed you need hard money, to get your head around the process for your first deal. I think starting with that you'll have plenty to keep you busy.

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  • Lara Nicole
    OP
    Member since 2021 · 23 posts · 20 votes
    5y

    @Noah Chappell I like how you think & I'm trying to make this type of leverage work. I would probably reverse the order though as finding anything in Portland right now that would qualify for a $20-40k down payment for a multi-unit would be very difficult. I also don't think it's wise to buy a MF in Multnomah county due to tenant laws & minimal cash flow. Other areas could work but I would need more cash down in the city.

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  • Eric Schultz
    Investor · San Diego, CA · Member since 2016 · 265 posts · 305 votes
    5y

    @Lara Nicole

    With $190K available to invest, looking out of state would allow you to get into 5 or so SFH in B-class areas with $150K+ per deal on conventional financing with 25% down payments. That could easily produce $1K net monthly cashflow for you plus the other benefits of real estate: appreciation, loan paydown (by tenant), tax benefits (paper losses), and inflation profiting (inflation erodes the debt).

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  • AJ ShepardPro Member
    Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
    5y

    @Lara Nicole

    I'm curious why you think a SFH in portland is better than Multifamily? If you've been looking in Portland at SFH lately, prices are incredibly high with inventory at or below 1 month.

    Multifamily is trading at about 175-250k per door on the 1-4 units. If you can make the jump to 10+ units you'll find units trading at 150-200 per door. Where as SFH is much higher.

    My suggestion like some of the others would be house hack a 4 plex. And this is for a couple reasons.

    Currently interest rates are low, this increases your buying power. You can afford more when your payment consists of less interest. Appreciation in the NW is great, so when you make 3% off of a 800k purchase each year that’s a good return (using leverage)

    When purchasing a 4 plex, you get to use the other 3 rental units as income for financing. This will help you out for qualifying. I don’t know that bank statement loans are as common these days.

    Moving into something like this will most likely reduce your rent to 0$ or be a positive cash flow. You will be able to save money quicker when not spending it.

    You will get the experience of being a landlord and owning property. Not having this experience and trying to do it 1000 miles away sounds difficult (Even for me).

    The laws in Portland are much different for a landlord that lives in the unit. You pretty much have Cart blanch on how you want run it. You don’t have to abide by fair housing, you can kick people out easier. They call this the grandmother clause. But is only if you live in the building and it’s 4 or less units.

    Hope this helps.

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  • Lara Nicole
    OP
    Member since 2021 · 23 posts · 20 votes
    5y

    @Eric Schultz I was thinking the same, possibly the Midwest. I would have to secure a solid PM though to make it effective.  I moved from San Diego to Portland, tiny world :-)

    I'll reach out to you if you don't mind as I'm always happy to chat with other investors.

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  • Lara Nicole
    OP
    Member since 2021 · 23 posts · 20 votes
    5y

    @AJ Shepardundefined You have some great points! When I moved to PDX I was originally thing about a SFH or duplex however I've ruled out a MF in Portland due to many factors. Due to the anti-landlord laws & more coming down the pipeline, plus the current state of the declining city I no longer see it as a viable investment option. My theory is multi-family properties in PDX will start to decline in demand & appreciation as the laws tighten. I've spoken with several investors who are selling their investments in PDX & going out of the state where they have more control over their properties. I'm still open to a SFH though.

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