WHY can't I buy a house?

Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes

I live in Portland, OR. I have been trying to purchase a fixer but have yet to succeed. Now, I know the price of anything is what someone will pay for it, so a large part of the result is in my valuation. But when I run my number it is usually done with cost to rehab myself (saving money) and I have been making cash offers. Are people really spending 400k+ for less than 10% ROI? (it's seems everyone else has cash too)

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Russell BrazilBusiness Member

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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes

Offer more money. Probably not what you want to hear, but thats the reality of the market. I see some people constantly, sometimes for years under bidding the market, and will raise their prices, but still always trailing the market. At some point, you got to decide to buy or give up instead of spinning your wheels.

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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Kyle Ward:
I live in Portland, OR. I have been trying to purchase a fixer but have yet to succeed. Now, I know the price of anything is what someone will pay for it, so a large part of the result is in my valuation. But when I run my number it is usually done with cost to rehab myself (saving money) and I have been making cash offers. Are people really spending 400k+ for less than 10% ROI? (it's seems everyone else has cash too)
As a lender I don't often work with cash buyers, usually after the fact when they are doing delayed financing.
If I were a cash buyer, I wouldn't be looking at the MLS. I'd put word out there to a few listing-heavy agents in the area that I'm a cash buyer (hand out proof of funds liberally) that can close in 10 days, bring me your deals that are super time-sensitive and need to be sold in 2 weeks, not 2 months. Time is money (someone is facing foreclosure, bk, etc), so you should be picking up this distressed property for significantly less than what it would get after 2 weeks of open houses and exposure to the MLS and a week of back-and-forth and then another month it'll take for someone to secure financing.
6 Reply
Sarah Clarke
Investor · Portland, OR · Member since 2016 · 11 posts · 4 votes
7y
It's a really competitive market out there. Your best bet is to hook up with RareBird and see if they can help you with some leads.
1 Reply
Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
2 great suggestions. Thank you @Chris Mason and
@Sarah Clarke
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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
7y
Offer more money. Probably not what you want to hear, but thats the reality of the market. I see some people constantly, sometimes for years under bidding the market, and will raise their prices, but still always trailing the market. At some point, you got to decide to buy or give up instead of spinning your wheels.
[email protected]301-893-4635 Podcast Guest on Show #192
District Invest Group545 Reviews
Website View Page
12 Reply
Nick C.
Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
7y
The short answer to your question is yes, people are really spending a lot of money to make weak returns. Just remember it's better to have no deal than a bad deal. Stay on the sidelines until you find the right one. If what you're currently doing to find a property is not working, you will have to do something different.
5 Reply
Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
I can digest what your saying @Nick C. Thanks
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Kyle Ward
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Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
@Russell Brazil In my particular case, I have just alternately bought elsewhere and achieved my desired returns (more than 2X what I would get here). So I am not necessarily spinning my wheels. But I would like to buy something local. Simply offering more money would be an irresponsible decision (financially). I guess I am learning a lot of invaluable lessons.
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Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Hi Kyle,
Sometimes it will make sense sometimes it doesn't. You don't know what the end buyers goal is or rehab cost. I wouldn't say offering more is just irresponsible on your part. What you are doing is evaluating the market and adjusting to the competition.
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Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
@Frank Wong In an effort to learn more I have been following properties after I lose the bidding war. And you're right sometimes it make sense sometimes it doesn't. Maybe you (or anyone else) can help me understand this scenario: A vacant fixer cash only property was for sale for 280k. I offered 310K. Didn't end up getting it but it sold for 280k (that part was very curious) Then 6 months later went for sale again and sold for 320K with nothing done to it. Whaaa?
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Frank Wong
Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
7y
Originally posted by @Kyle Ward:

@Frank Wong In an effort to learn more I have been following properties after I lose the bidding war. And you're right sometimes it make sense sometimes it doesn't. Maybe you (or anyone else) can help me understand this scenario: A vacant fixer cash only property was for sale for 280k. I offered 310K. Didn't end up getting it but it sold for 280k (that part was very curious) Then 6 months later went for sale again and sold for 320K with nothing done to it. Whaaa?
Hi Kyle,
That's great you are keeping track. Something you have to do to learn. Did your cash offer go in as a non-contingent offer? Meaning you waived all contingencies. Could be the reason why they took a lesser price offer.
The 6 months later part could be that the buyer either lost funding for the rehab, made a mistake in their estimate, just wanted to quickly move it for a small profit (probably not this one), or some life event came in and they needed the money.
These are the scenarios I would be thinking of in your case without knowing more details and just guessing.
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Patricia Steiner
Real Estate Broker · Hyde Park Tampa, FL · Member since 2019 · 2k+ posts · 3k+ votes
7y
I represent a lot of cash buyers and, after a painful learning cycle, they have come to realize that cash does not equate to a price discount. In highly-sought after markets, inventory is extremely low and buyer demand is high. Sellers don't have to sell at a discount - and many can't since their next home will cost more than they expected.
But here's when cash will get you a discounted buy provided you close fast:
1. Foreclosures
2. Probated properties
3. Divorce situations
4. Challenged properties (no life remaining on AC and/or roof, renovations "gone wrong")
5. Investor properties for sale (usually anxious to move on to the next deal)
6. Some relocation company properties that have exceeded 120 days on market.
My recommendation is to find a broker who works with investors who will specifically target these opportunities. Ask what relationships they have with attorneys and trust departments. Are they relocation certified?  I think you'll find that your hard earned cash will get you what you want with a more targeted approach.
3 Reply
Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
@Frank Wong You're probably right regarding the contingencies (I dont recall if I had them) good thoughts on the rest. Thanks
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Lisa Thoele
Investor · Newberg, OR · Member since 2012 · 161 posts · 82 votes
7y
@Kyle Ward I have found that in general I cannot compete with buyers on RMLS in the Portland area. If its financiable it will be scooped up by a retail buyer. If its a cash only deal another investor who is comfortable with different metrics will purchase it for more than works for me. Usually the wholesale deals don't work for me either as I use contractors and private money. I have been endlessly frustrated by this so I feel your pain. It has made me get more creative and consider what other strategies I could switch to. Although I know its quite controverial and being a licensed broker I have my own thoughts on this topic but have you tried working through a wholesaler? Or maybe its time to try doing a little of your own marketing? Driving for dollars maybe? Best of luck!!
1 Reply
Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
@Patricia Steiner Yes, I am coming to realize that cash doesn't mean discount - Im glad you said that. Thank you for the advice. I will pursue that avenue.
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Brian Ploszay
Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes
7y
You're probably underestimating the value of your market. For various reasons, there is a shortage of housing in your area and demand is strong. If your market has experienced strong appreciation in the last few years, then maybe 10% ROI is not the real return.
2 Reply
Mica Moore
San Antonio. Tx · Member since 2018 · 75 posts · 47 votes
7y
If you are a cash buyer why waste your time with MLS listings (where the competition is)? Do some DIY ground work and buy without realtors. Define the parameters of your ideal property (location, size, condition ,etc.) and go to the title company and ask for an owners lists of matching properties. Contact owners directly and ask if they are interested in selling to you, a cash buyer.
1 Reply
Christine Kankowski
Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 783 votes
7y
The answer to getting a good deal is finding the homes that not everyone else sees. You will pay market value for anything on the MLS. You can drive around and find run down homes, search the assessors office for the owners address and make offers that way.
You can search for the homes with Notices of default on them
There are many ways, but finding a good deal on the MLS is the most competitive since the homes are sent to you with no work at all.
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Jeff S.
Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes
7y
@Kyle Ward I have an email of a fixer on Killingsworth for 310k looks promising. Can email you.
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Michael T.
Los Angeles, CA · Member since 2018 · 326 posts · 279 votes
7y
@Kyle Ward in cities such as; Portland, Seattle, Los Angeles, Denver as you and @Patricia Steiner mentioned cash does not mean discount since a majority of these properties can be financed.
Yes, while people are willing to accept lower returns at this in these markets they recognize the appreciation opportunities that come along with the purchase.
1 Reply
Kyle Ward
OP
Rental Property Investor · Portland, OR · Member since 2017 · 19 posts · 2 votes
7y
@Michael Tripp yes, that makes sense. Thanks.
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John Woodrich
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
7y
@Kyle Ward some markets are cash flow markets, some are appreciation markets, some are both, and some are neither. Your metric of 10% ROI contains some assumptions based on cash flow, appreciation, or both. If people are buying in your market they are either seeing something you aren't or more desperate than you are. Or maybe they think that 8% in real estate is a better play than their prospects of the stock market or other investment classes.
Hard to tell what other investors are doing until you start talking to them. Stick to what is working and if that is investing out of your market so be it.
1 Reply
Christopher Lynch
Providence, RI · Member since 2018 · 81 posts · 25 votes
7y
On market deals can be a challenge in some parts of the country. The market is really hot right now. I would look for local investors who may have off market deals they need to unload. They are out there. You can also try other methods like marketing and attract motivated sellers to you.
0 Reply
Nick Rutkowski
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Kyle Ward
Sounds like you’re better off winning the lottery and using the proceeds to purchase properties all cash. That MUST be the ONLY logically way to buy in Portland. Keep the 90s dream alive!
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Mathew Wray
Real Estate Agent · Portland, OR · Member since 2013 · 412 posts · 219 votes
7y
Morning Kyle,
I think one thing we forget sometimes is that price isn’t solely set by what someone is willing to pay for a home but also by what someone is willing to sell it for. There’s two sides to that equation.
There’s great advice here and it sounds like you’re on the right path already...to add a little, I’d say go back and look at your offers. Are they presented professionally using contracts, forms, and terms a listing agent will be familiar with?
In your 280 vs. 310 example a seller or listing agent may not have thought you were a serious contender. If the 280 offer was a known quantity then maybe that confidence in closing was worth 30k to the seller.
Good luck!
Mathew
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Earl Hatmaker
Specialist · Dayton, OH · Member since 2018 · 59 posts · 41 votes
7y
@Kyle Ward why not stick with what is working? You bought out of your market and are getting great returns? Look for those deals, factor in your 10% for PMC and keep on plugging away.
Good luck!
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