Bend, Oregon Investment Thesis

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Bend, Oregon Investment Thesis

Brian Bellew
Investor · Denver, CO · Member since 2014 · 36 posts · 4 votes

I own three single family rentals in Bend, Oregon that all cash flow pretty well and have good equity positions.  Bought in 2010, 2012 and 2013.  I now live in Denver but have strong convictions about growth in Bend.  Any other investors with knowledge of Bend that can see this becoming a Boulder or Austin?

Some notes on the area:

-Consistently in the top 10 counties in the US for population migration (Deschutes).

-Oregon State Cascades is building a new 4 year university with anticipated 5,000 students.  The university currently owns 56 Acres of land on the West side of Bend and building started summer 2015.

-Growing technology scene, microbreweries going national (10 Barrel and Deschutes)

-Rental vacancy rate around 1%

-Limited availability of vacant land due to local governments inability to agree on a new Urban Growth Boundary.

-Mt Bachelor expanding by investing in new lifts, and summer mountain biking.

-Located between San Francisco and Seattle (Tech hubs of the West Coast).

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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
10y

Austin or Boulder  No way..  constrained by access to major metro areas and No interstate.

limited Jet service and still a very small community ..

Great little spot though for those that like the 4 seasons and high desert type things.

you did VERY good buying when you did.. as I am sure those properties long term will out perform most anything save the best CA or CO locations..

At the end of the Day Orygun is anti business on a political level.. the UGB restrains gowth tax s are some of the higheset in the country.. So I think it will be what it is.. summer over flow for N. CA or Snow birds... PDX people that want to get out of the drizzle.. and those that like the lifestyle there.

Remember when it crashed it CRASHED hard.. rural Oregon in many areas has 20 to 30% unemployment almost as Bad as Detroit.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    Austin or Boulder  No way..  constrained by access to major metro areas and No interstate.

    limited Jet service and still a very small community ..

    Great little spot though for those that like the 4 seasons and high desert type things.

    you did VERY good buying when you did.. as I am sure those properties long term will out perform most anything save the best CA or CO locations..

    At the end of the Day Orygun is anti business on a political level.. the UGB restrains gowth tax s are some of the higheset in the country.. So I think it will be what it is.. summer over flow for N. CA or Snow birds... PDX people that want to get out of the drizzle.. and those that like the lifestyle there.

    Remember when it crashed it CRASHED hard.. rural Oregon in many areas has 20 to 30% unemployment almost as Bad as Detroit.

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  • Adam Kroll
    Real Estate Agent · Boulder, CO · Member since 2014 · 87 posts · 24 votes
    10y

    What are the typical rent/property value ratios?  It sounds like you've done some good research.

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  • Brian Bellew
    OP
    Investor · Denver, CO · Member since 2014 · 36 posts · 4 votes
    10y

    Currently seems like you can find a $250-260k house that will rent for $1500-1600/mo. Average rent for SFH on Zillow is $1,650 in Bend.

    My best cash flow property I purchased as a short sale in 2010 for $190k.  Now rents for $1,700/mo. but might be able to do better as I haven't raised rent for a while. 

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  • Derek Faller
    Rental Property Investor · Bend, OR · Member since 2013 · 81 posts · 24 votes
    10y

    I hope it doesn't become like Austin or Boulder, but I do think home values will stay strong and continue to grow as more people continue to move here and we run out of room to build more homes in the UGB. If the City can resolve some infrastructure issues and finish out the Juniper Ridge area to attract more business to the area then things will really do well for Bend. Like Jay said the lack of a major highway and large airport will keep things somewhat in check. If you are able to cash flow your rentals then I wouldn't sell them now, though it is hard to find stuff you can buy and cash flow these days with the way prices have become.

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  • Mike Martin
    Banker · Bend, OR · Member since 2014 · 15 posts · 7 votes
    10y

    Brian good to bump into you on the forums and hear where you landed.

    It will be a long time, as in not in our lifetime, before we could possibly look like a current Boulder, Austin much longer.    It will take many years for OSU Cascades to develop as a destination University and that is the big driver for the base cultures of Boulder and Austin.   Jay's points are valid.

    I moved to Bend in 1995 and was told it was the next Boulder and we were about to have a 4 year University.  21 years later we are really about to have a University with a 4 year campus, OSU Cascades already has just over 1100 students in their facilities at COCC.  

    However we don't need to be like any other community to enjoy strong growth from people who enjoy the local lifestyle.  Given the average age of my clients moving here we might have more in common with Sun City, Az than Boulder 20 years from now.  The new residents are not restricted to the West Coast.  Bend is now nationally known and I have significant numbers of non-west coast clients from all corners of the country and a few corners of the globe. 

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  • Nate Wightman
    Investor · Denver, CO · Member since 2016 · 213 posts · 57 votes
    10y

    @Jay Hinrichs  do you think the hard crash in Oregon was due to the heavy reliance on timber and hasn't Oregon gotten a bit more diversified??   Oregon was also starting to talk about a college pay system where student would pay for college for 20 years after college based on 5% of income.... so teachers paid $2500 per year and hedge fund graduates paid $10000 per year.... (it was something like this...can't really remember)  seemed like a neat idea.... 

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Nate Wightman  rural Oregon was dependent on timber yes.. and the spotted owl and marbled murilet led to a crash in the market.

    Bend is an outlier for Oregon... there are a few  like Hood river.  And few tiny spots on the Oregon coast.. the rest of the economy is Willamette valley..

    Bend through land use planning that is not available in other parts of the state allowed large golf course communities.. the established one's like Broken top have done well and I suspect a lot of the snow bird types from around the country live in those areas as @Mike Martin Mike noted.. I have personal friends that live there.. they live in CA desert winter summer in Bend.. and a lot of well to do Portland ites move to Bend at least for a few years until maybe the cold gets them.

    The last crash was predicated on a large run up in values that was not sustainable from locals.. and the market crashed hard... its coming back now and values have bounced back. But its still very dependent on out of state folks to buy the higher end properties.

    The newer golf course developments all failed  ( bad timing) but are bouncing back now.. and of course golf is a dying industry as a whole...

    As values increase in the BEnd proper  Redmond gets the spill over and even Prineville.

    However to the original question of whether it can become a Boulder or Austin don't think so.  One of main issues is ORegon is Very poor at long range infrastructure planning and implementation.   And you have a very heavy NO GROWTH attitude as well from ensconced locals.  My buddies who live at Broken top were Very much opposed to the new collage for instance...

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Jay Hinrichs:

    @Nate Wightman  rural Oregon was dependent on timber yes.. and the spotted owl and marbled murilet led to a crash in the market.

    Bend is an outlier for Oregon... there are a few  like Hood river.  And few tiny spots on the Oregon coast.. the rest of the economy is Willamette valley..

    Bend through land use planning that is not available in other parts of the state allowed large golf course communities.. the established one's like Broken top have done well and I suspect a lot of the snow bird types from around the country live in those areas as @Mike Martin Mike noted.. I have personal friends that live there.. they live in CA desert winter summer in Bend.. and a lot of well to do Portland ites move to Bend at least for a few years until maybe the cold gets them.

    The last crash was predicated on a large run up in values that was not sustainable from locals.. and the market crashed hard... its coming back now and values have bounced back. But its still very dependent on out of state folks to buy the higher end properties.

    The newer golf course developments all failed  ( bad timing) but are bouncing back now.. and of course golf is a dying industry as a whole...

    As values increase in the BEnd proper  Redmond gets the spill over and even Prineville.

    However to the original question of whether it can become a Boulder or Austin don't think so.  One of main issues is ORegon is Very poor at long range infrastructure planning and implementation.   And you have a very heavy NO GROWTH attitude as well from ensconced locals.  My buddies who live at Broken top were Very much opposed to the new collage for instance...

     Jay, 

    I have never reached to you but have read plenty of your posts.  I would love to ask you a couple of things. 

    If you were over here and going to invest in Central Oregon where would it be?  Bend I don't see anything that cash flows with 25% down. 

    Redmond is getting harder all the time.          

    I have been looking and in Prineville and even Madras.  I would love to hear yours and other peoples thoughts on this.  

    Thanks everyone

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Eric Bilderback  I like sisters the best out of all those places.. neat little airport.  your in the timber etc etc.  I helped my bank with some OREO way early in the crash.. stuff that Taurus homes built on the East end of town.

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  • Account Closed
    Bend, OR · Member since 2015 · 16 posts · 5 votes
    10y

    I've had the same struggle as @Eric Bilderback since getting started on this path a few months ago.  Also have been following @Jay Hinrichs hoping to pick up some pearls.  I think it's possible to find cashflow in Bend, and I have my first under contract right now with good confidence that it will do so.  When I looked at the surrounding communities in Central Oregon I think they all offer a niche but ultimately ended up focusing on Bend and Redmond.  With a long-term perspective my hunch is they will outperform though won't cashflow as well as places like Prineville (in general) coming out of the gates.  I like Sisters too (almost moved there instead of Bend) but it seems a lot more tourism dependent and less diversified so I went where the bulk of the new job creation is happening.

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Jay, 

    It is a great little town.  Although there is not a many if any properties that pencil out.  Do you see any red flags with the surrounding counties.

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Account Closed  I think many on the west coast try to take a mid west model and put it in to a west coast model.. IE a square peg into a round hole.

    for whatever reason you think a property must cash flow.. IE net money left over after 25% down and pay all bills..  other wise its no deal.

    I submit that is mid west thinking and flawed for west coast.

    The mid west that is what you need to do because real estate really never moves in value and many times goes down over time and or cap ex creates a negative equity situation because values don't rise. so you NEED cash flow to make any sense at all in owning them. plus they are in many instance highly illiquid compared to west coast assets.

    In just looking at your avatars it looks like you folks are in your 20 to 30's most buy and hold investors have a fantasy of owning the properties for ever.. so for ever is 20 to 30 years. 

    The idea here is LET your TENANT pay your home off... you now have a 200k home paid for that you only put up 25% of and in 20 to 30 years instead of it being worth what you paid for it .. or maybe less and maybe just a tiny bit more.. it could easily be worth 50 to 100% more than you paid for it...  So let me ask you if you could put in this case 25% down on 200k home  50K in a bank account it just sits there and in 20 years yoiu have 300k... would you do it. ?  If it make 100 a month positive you have another 24k .. would you not do it over 24k.  but if you keep setting the bar that it must positive cash flow and you never buy you never have this big nest egg when you need it in your retirement years.   And remember when you put the 25% down on this property you never put anymore into the account. 

    So thats one way to look at it .... forced savings that someone else is doing for you quality asset that can be sold on the open market ( usually to a home owner) you don't get bracketed into rental areas that only resell to investors therefore the values are backed into based on the cash flow desires of the day... like some markets the 2% rule or greater which really hammers values.  Since rents really don't rise in the cash flow areas they stay really flat over the years

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  • Account Closed
    Bend, OR · Member since 2015 · 16 posts · 5 votes
    10y

    @Jay Hinrichs I definitely got stars in my eyes listening to @Brandon Turner and the podcasts describing 2% rules and 12%+ cashflow but ultimately ended up with what you suggested: being content with 5%+ cash on cash and enjoying (hopefully) better appreciation in this market. With the leverage my total ROI comes out ahead even with lower cashflow, dreams of semi-passive income notwithstanding. I wish I was in my 20s or 30s and had more time but I'm mid-40s so have to keep learning more vehicles (notes, liens, commercial, hard money, ?) and make comparisons on where to best place my dollars. Not unhappy with the first SFR I have under contract but am hoping to keep getting smarter and finding ways to further diversify and outperform with the remainder of my funds.

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Jay,

    I really appreciate that advice.  I am not sure I have a response more then that.  I need to chew on it for a while. 

    Duncan,

    Thanks for jumping in as well.  I might send you a PM I would be interested in how you found your property and the details.  Good luck with it!

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  • Brian Bellew
    OP
    Investor · Denver, CO · Member since 2014 · 36 posts · 4 votes
    10y

    @Jay Hinrichs if you were a 20 or 30 something investor in Bend would you still be a buyer now or would you try and save cash to buy when the market softens up a bit? 

    @Duncan MacDonald what are the details of the SFH investment property you are purchasing? Purchase price and what the property will rent for?

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  • Mike Martin
    Banker · Bend, OR · Member since 2014 · 15 posts · 7 votes
    10y

    I currently own Central Oregon properties in Bend, Redmond and Prineville.   Previously owned and worked in Sisters.  In the past Sisters has been a real challenge to place tenants from October to April.  Given Central Oregon's current rental housing shortage I think that has changed but don't have first hand confirmation.  If you buy right any of the Central Oregon communities offer opportunity.  Jay makes an excellent point the west coast plays real estate with a different set of rules.  Part of the opportunity is speculation on values increasing.  Speculation = Risk.  I view Prineville as my highest risk property, the employment situation in Prineville is challenged.   However Prineville is now getting spill over from Bend/Redmond and is one of my best performers.    The community of Redmond is progressive minded and wants to grow.  Their downtown revitalization is a good example, it's come a long way from 10 years ago.  I'm optimistic Redmond is going to continue to become more attractive.   Bend is going to be interesting with the restriction of the current UGB.  Until we have an expansion of the UGB a classic supply and demand problem will be in play.   

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  • Account Closed
    Bend, OR · Member since 2015 · 16 posts · 5 votes
    10y

    @Brian Bellew not sure how to include your post yet and be fancy but here's the outline of my current deal: 3/2/2 10 years old 1480 sqft mapped to good schools on a corner lot that backs to a park in NE Bend.  Purchase price 230k, estimated rent 1450, clean inspection so put in 3% for repairs and 3% for capex, currently running less than 1% vacancy here in that rent range so total expenses came out to $338/month + mortgage costs of $890/month (25% down) for $220/month cashflow or ~4.3% cash on cash.  This is my first investment property ever so I probably made a few mistakes but I think that's going to be pretty close.  Figuring an average of 7% returns in the stock market it doesn't look so good compared to my past options but when you add ~5% appreciation against the up-front cash it gets more interesting.  Bend was a bit over 10% appreciation last year but in the last 20 I think it's averaged 5% including the ride up and down with the bubble and crash. To me, going back to your thesis, there is reason to be relatively confident prices will stay firm and appreciating for at least the next 3-5 years but I sure intend to keep monitoring that.

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  • Brian Bellew
    OP
    Investor · Denver, CO · Member since 2014 · 36 posts · 4 votes
    10y

    Thanks for the great discussion guys.  Overall, I worry the demand will weaken for the peripheral markets around Bend if the overall market softens.  I think these areas are seeing strong growth now as buyers/renters are being priced out of Bend but if the market dips I think these areas would be hit harder than Bend.  I don't see people moving from other areas of the country to live in Redmond or Prineville like they do for Bend.  Seems tempting to search for yield in these areas but it would keep me up at night to own investment properties in these areas.  

    I tend to look at real estate investment like a stock analyst.  Would I rate Bend a Buy, Hold or Sell?  At this point I would rate a Hold.  I would not be a buyer because I see the likelihood of a pullback in the market in the next 3 years as 50/50.  To me the window of opportunity to buy has passed.  Although I do believe long term one could make a strong investment thesis for the area due to quality of life, population migration trends of millennial's and retirees, municipal capital investments being made such as new parks, ice skating rinks, white water park on the river, investments at Bachelor and OSU Cascades.  I also believe the entrepreneurial spirit of the city is still in its infancy, although we may not end up looking exactly like a Boulder or an Austin, I think Bend will see a higher rate of startups and entrepreneurs moving there from tech hubs on the West coast.  But who the hell really knows...

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  • Jonathan J. Miller
    Lender · Denver, CO · Member since 2015 · 275 posts · 35 votes
    10y

    HI Brian, I always like to reach out to the fellow Colorado Investors.  Let me know if I can ever be of assistance.

    Go Broncos

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  • Ian Saingarm
    Investor · Bend, OR · Member since 2016 · 52 posts · 15 votes
    10y

    Hi guys,

    My wife and I own a single family we are setting up to rent (currently live in) in SE bend near Old Mill that we bought as an REO for $210 and should be able to rent for $1400 or so. We currently are selling a condo that we rehab'd in CA and will be looking to get into another place and are asking the exact same question about Bend vs Redmond.

    It seems to me that the $1200-$1500 rental is a very strong market with as mentioned less than 1% vacancy rate.  The more expensive houses have much less competition because it seems those are people moving into the area from CA or PDX area and are pretty quick to purchase a place.

    We were looking at a couple duplex's in redmond that looked like they might pencil.  Most of the stuff in bend so far has not really penciled unless we put a lot down or we got a great deal which is of course what we're after.

    Are any of you guys interested in doing a BP meetup in the bend area?  I am happy to set one up if there is interest where we can kick around ideas and drink some of the good coffee or beer this town offers.

    Best

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  • Account Closed
    Bend, OR · Member since 2015 · 16 posts · 5 votes
    10y

    Ian, I've met some great people on BP in a short amount of time and a whole lot of them are up for a Bend group session.  We just had one last Saturday with folks like @Jeremy Near and @Tony Griego.  I think there's a lot of value in the networking, idea sharing, potential partnerships and helping each other out.  Would be happy to include you next time we organize one.  I think Jeremy even had a place in mind so we just need to pick a time that works for the majority of folks and make it happen.  

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Ducan,

    Please include me in the meet up. 

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  • Tony Griego
    Bend, OR · Member since 2015 · 21 posts · 4 votes
    10y

    I've met with Duncan twice now, and completely agree. I look forward to the next one.

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  • Ian Saingarm
    Investor · Bend, OR · Member since 2016 · 52 posts · 15 votes
    10y
    Originally posted by @Account Closed:

    Ian, I've met some great people on BP in a short amount of time and a whole lot of them are up for a Bend group session.  We just had one last Saturday with folks like @Jeremy Near and @Tony Griego.  I think there's a lot of value in the networking, idea sharing, potential partnerships and helping each other out.  Would be happy to include you next time we organize one.  I think Jeremy even had a place in mind so we just need to pick a time that works for the majority of folks and make it happen.  

     Duncan,

    That would be great, I will shoot you a PM with my number.  I work out of town but hopefully will be here when you guys get together next time.

    I am also happy to setup a meetup.com group if you think that would be helpful.

    Ian

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  • Jeremy Near
    Contractor · San Diego, CA · Member since 2015 · 7 posts · 0 votes
    10y

    Hey guys, a meet up sounds great. How bout this Saturday at good life brewing,  sometime in the afternoon? 

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