Updated about 15 hours ago on . Most recent reply
Seeking guidance - Cash buy vs financing in expensive market
Hey folks - My wife and I are interested in expanding our investment in our home town. We've run a two-unit short term rental here in Portland for 5 years with success (2025 will be our best year yet), and are interested in obtaining a long term rental or two here locally to get some experience as landlords (slightly less active than running an STR). We're attracted to the city's openness to adding ADUs, etc to traditionally single-family residential zones. We are most focused on long term investing.
We're looking at a property that has a 2/1 house with value add potential (basement) and a very nice ~8 year old detached ADU. The property (which I think of as 2 units) is near rent-ready unless we were to finish the basement before renting. I've reviewed the zoning rules and a second detached ADU is likely allowed (making that make financial sense is another story).
Affordability is tough here, and I feel like I'm in a push/pull between cash on cash return and long term ROI (including appreciation). We're in the fortunate position to be able to pay cash for this property, which would get us a 6% cash on cash return roughly. However, that would put all our available capital into this one property. If we were to finance this property the yearly CoC drops to 1% or less...but leaves a good amount of capital to fund the next property.
What would you do in our situation? How should I think about this investment?
I'm interested in your thoughts! That said, "invest outside of Portland" doesn't help me right now...someday I'll get there.