Should I buy it? Please advice me...

Question

I am new in this  and looking for some investment multiplex properties. Found one which is a triplex in SE Portland, OR. Asking price is 480000

Rental is about 3400/month. Tax is 8K/year.

Built 2000. Good condition.

Is it a good buy? I need some suggestion and advice.

Steve B. · Answer

@Tahmid Kazi SE is good rents west of 82nd ave

Brad Hammond · Answer

SE is great, I would look at Sellwood and Milwaukee.

Tahmid Kazi · Answer

@John Viel Thanks for the explanation. Overall properties in Portland are like that. 1% might be doable but getting 2% will be like winning a lotto!

@Brad Hammond Thank you Brad for your valuable input. Is SE Portland a good area for rental as far as vacancy concerns?

John Viel · Answer

1% - 2% rule is a quick calculation, nothing fancy. Its rent/purchase amount  convert decimal to %

3400 / 480000 = .007 (percentage in decimal form) x 100 = .7%

This is not a true analyzation, but many use this as a reference to determine if its even worth analyzing depending on their criteria. Some say they want to be above 1% some want to be at 2%  or somewhere in between.

Brad Hammond · Answer

Hi @Tahmid Kazi, my thought is that if it cashflows right now it could be a good deal (not great deal).  You will have increased rents over the next few years in Portland and hopefully in 5-7 years you can refinance and pull your downpayment out.  The home run deals in Portland are based on application (forced or market) and not as much with cashflow.  Let me know if you have more questions.

Calvin Ozanick · Answer

The numbers start to look better here. I always overshoot my reserves and reanalyze them at the end of a calendar year. This allows me to put that money into other areas if needed.

Tahmid Kazi · Answer

@Calvin Thanks for your valuable input. In Portland, OR market I doubt you will find any property which doesn't eat 50% of your rent assuming 20% downpayment.

After putting into calculator, this is what I got(assuming tenants pay utilities and a flat fee for water, sewer, garbage disp, area is good for renting out as it is close to downtown and highways and transit; Property is built in early 2000s.): https://www.calculator.net/rental-property-calculator.html?cprice=480000&cuseloan=yes&cdownpayment=20&cinterest=3.5&cloanterm=30&cothercost=3000&cneedrepair=no&crepaircost=10000&cafterrepairvalue=150000&ctax=8313&ctaxincrease=3&cinsurance=1200&cinsuranceincrease=3&choa=70&choaincrease=3&cmaintenance=1200&cmaintenanceincrease=3&cother=0&cotherincrease=3&crent=3680&crentincrease=3&cotherincome=0&cotherincomeincrease=3&cvacancy=5&cmanagement=0&cknowsellprice=no&cappreciation=3&csellprice=200000&cholding=20&csellcost=8&printit=0&ctype=&x=53&y=24

Calvin Ozanick · Answer

I would say that this property does not look great when you get into the numbers a little more. If you are working with a conventional loan, your mortgage payment eats up more than 50% of your rent. Then factor in taxes, insurances and roughly 30% saved for reserves, you are not looking at much cash flow. Then after the fact, we have no idea if the area, tenants are good. Do tenants pay utilities? That is a big swing, how much do you pay for city gas, water and any other fees. Any HOA's involved? Lots to consider, would say rent needs to go up regardless.

Tahmid Kazi · Answer

Hey John Thanks for the input but any reference to calculate the variation? I don't know what is that. I know caprate, GRM but not this 1%-2% that you are looking. Thanks again.

John Viel · Answer

Also, I know many use some variation of the 1%-2% rule as a quick check to see if its even worth looking at a property. This property is not even doing 1% currently. So unless the current owner has rents far below market and you are looking as a value add deal, or you are going to get owner financing and good terms the performance is currently below what many will consider.

Should I buy it? Please advice me...

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