Oregon Cash Flow

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Oregon Cash Flow

Bill Horton
Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes

I live near the Portland Metro area and my goal with real estate is to buy and hold to build passive income to replace the income from my job.  I currently do not own any rentals and only have experience buying two personal residences.  

I have been spending tons of time reading on BiggerPockets, listening to the podcasts, reading books and practicing analyzing properties off MLS.. I have looked at tons of properties on MLS and multi-family properties listed on Loopnet. I find it very difficult to find properties in the Portland Metro area that will provide a great cash flow after all expenses. I try to look at them with the 1% rule and 50% rule in mind..

I know that MLS isn't the best place to find a deal, but even if the prices were significantly lower, it still doesn't seem like it will work. Especially after hearing about the successful investors in Dallas or Phoenix, or other "cash-flow markets" where the prices are much lower.

I'm curious if there are any investors in my area who are buying and holding properties that provide good cash on cash returns and cash flow. If so, I wouldn't mind hearing how those properties have been acquired.  I am very tempted to pick another market to invest in, since I want cash flow.  It might sound dumb, but it just makes me kind of nervous not having easy access to the property.  I guess that might be something I need to get over.  Any good information would be appreciated!

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Mike NussPro Member
Real Estate Entrepreneur · Portland, OR · Member since 2014 · 451 posts · 328 votes
11y

In my opinion there are 5 excellent ways to get cash flow in Portland

  • be proactive
  • do not buy off of MLS
  • buy under rented properties
  • do value add through rehab and rent increase
  • self manage your units

Portland is an interesting market. The romantic areas of town start at 5 caps and go down from there. It's tough to provide cash flow when the return on NOI is the same as the interest rate you're borrowing. That in and of itself means you're only getting the 4-5% return on the downpayment you've made.......unless you add value through rehab and rent increase. $400 a month more in net rent = $96,000 in market value (assuming 5 cap). That type of value add is really easy to do in Portland (most rentals in the midwest won't ever reach 96K in value, where as that is a common value add in Portland). However, most of the MLS properties do not have that type of upside. If they do, they end up getting bid up beyond the value add you want to make.

The best part of the romantic properties and close in areas is the tenants these properties attract. We have multiple 800+ credit score tenants, all with $ in the bank. They sign their paperwork, move in, pay rent on time if not early and are rarely heard from again. Most of the work is in the lease out. Saving that 6-8% in monthly property management (don't forget the expensive lease up fees) is significant in this market as the property management typically makes just as much if not more cash flow than the owner does in NOI.

@Bill Horton  you're sitting in a potential gold mine there in OC. Just my opinion, but there are a ton of vacant homes in the historic areas of OC close to downtown. Urban Renewal has done a ton for the downtown area and the developer from Tacoma is going to make waves with his Blue Heron Paper Mill redevelopment. It's probably worth your while to send some letters out in your backyard. 

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  • Account ClosedBusiness Member
    Real Estate Broker · Ben Lomond, CA · Member since 2014 · 62 posts · 47 votes
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    Hi Bill. I am from California and I am a Realtor/Investor. I was just in Portland last week doing research. I agree with you that the MLS is not the best place to find deals. Try PropertyRadar (subscription required) I believe Bigger Pockets has a deal under the resources tab. Also get creative and look for probate deals or walk neighborhoods and find the worst house in the best neighborhoods and knock on doors. Also work your sphere of influence. There may be deals there. Go to the local REI meetings if they have one. If not, start one and you will find people will come to them. Network for deals.

    While I was in Portland I also went over to Astoria. I hadn't been in years and WOW! Change is happening there. The downtown is changing and the residential real estate market appears to be behind all of the nice changes downtown, so I think there is a lot of opportunity there. Since I have been back in California I can't stop thinking about Astoria. I'm doing research and running numbers.

    Research, research, research. Find those neighborhoods and track the numbers on sales and rents. Good luck!

    2Reply
  • Account ClosedBusiness Member
    Real Estate Broker · Ben Lomond, CA · Member since 2014 · 62 posts · 47 votes
    11y

    Update on my post above. BP has a link to foreclosure.com not proeprtyradar.  My apologies.

    0Reply
  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    Thank you Lance. I haven't looked much towards the coast. I have looked around the Portland Metro area, which is very pricey. Probably not bad compared to most of California though, I'd assume. I have found a few properties in rural areas that may work, but will need extensive rehab. I do plan on driving some neighborhoods and sending out letters, especially on some run down multi-family properties. Hopefully it will turn up something. I have been to one REIA meeting here, I will definitely be attending more in the future.

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  • Genna Golden
    Rental Property Investor · Portland, OR · Member since 2009 · 82 posts · 30 votes
    11y

    Portland not typically a cash flow market. Prices just too high. Seems like you need to create value with a rehab, as you said or find a way to buy way under market value.

    I see flipping and buy and hold working well here.

    I have done cash flow out of state and not liked it. They say "manage the manager" but knowing the market and ability to easily see/check in on your property I feel is important. 

    2Reply
  • Genna Golden
    Rental Property Investor · Portland, OR · Member since 2009 · 82 posts · 30 votes
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    Oh, and Lance, regarding Astoria, yes, change slowly happening there. I know several people who have decamped from Portland and started businesses there. It's getting more attention and has real appeal. (especially when it's sunny!) 

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  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    Thank you Genna.  I think I will likely start with a single family that I can buy cheap enough and rehab to still provide cash flow.  Maybe I can use the value created through that to get into larger properties.  I agree with being able to see and check in with your properties while starting out.  Maybe someday if I'm able to buy a large complex with an on site professional manager I would be more comfortable buying far away.  Its nice to hear that buy and hold is working in Oregon for someone though!

    0Reply
  • Micki M.
    Flipper/Rehabber · York, UK · Member since 2013 · 895 posts · 453 votes
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    @Bill Horton Explore Indianapolis as an option.  @Shawn Holsapple or @Lee Smith can connect you with resources to buy cash flowing SFHs out there.

    1Reply
  • Joe Hernandez
    Investor · Portland, OR · Member since 2014 · 11 posts · 0 votes
    11y

    Yes, with the prices here it's hard to get high cash flow numbers on SFR, but if your willing to make a little less each month then the it may be a good start. The rents are high and continuing to go up. Keep in mind the renters are still paying your mortgage and hopefully appreciation along with raising rents in the future, it may make sense to purchase in Portland today in the long run. I have a found deals on the RMLS but it is competitive and unless your willing to jump on a deal right away and pay over list price (on the good ones) they typically go within a few days. I recently have got gotten to know a couple wholesaling companies in the area who pick up properties various ways and turn around and sell them to investors in the area. These properties NEVER hit the RMLS so the competition isn't as bad plus it's a first come first serve buying process. So, if your ok with the asking price you don't have to go higher.

    0Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    11y

    I think the best advice I could give people in Portland is that "Oregon is more than Portland". Property prices are 2-4x the prices for the rest of the state & the rents are pretty close to the same. Depending on what your are looking for there are several more rural areas around Portland that people commute into Portland from that would cash flow. If you want to move even farther out, look for towns that have good rent-purchase price, but still show some growth in the market. Once you have targeted the areas that you would like to invest in, start looking for the worse houses in the best neighbor hoods. Those are the  gold mines. 

    I personally invest in Salem. I have purchased in order, 1 MLS, 1 Auction, 2 Shortsale, 1 MLS & 1 Auction. So its important, if your are not going to direct market, to keep your eyes open for great deals and snap them up. Another piece of advice I can offer is to do more than put lipstick on a pig. If you can learn to find the hidden potential in a property you are more likely to be successful & find deals others haven't.

    2Reply
  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    Micki, I will look in that area, thank you.  Joe, I agree that there is a lot of potential in the Portland area in the long run.  I read an article the other day about the population growth expected in the area and there will definitely be more demand for housing.  It just seems like it would be very difficult without a large pot of money to accumulate enough monthly cash flow to do it full time.  I signed up online for a local wholesale company's listings.  Hopefully something good will come along. 

    Rusty, I completely agree with looking at areas outside of Portland.  I have looked around Molalla and also in the Scappoose and St Hellens areas and then numbers look a lot better than in Portland.  I don't really look in Portland much at all actually.  I've seen a few listings in the Salem area and it looks like the prices are a lot lower than Portland. They still didn't look like the 1% rule or 50% rule would fit though.  I know those are just guidelines, but are you finding deals that fit those?  Do yours still produce cash flow after accounting for vacancy, repairs, management and every thing else?  

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
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    The only Portland folks I know investing are buying out-of-state. 

    1Reply
  • Eric B.
    Engineer · Seattle, WA · Member since 2014 · 59 posts · 35 votes
    11y

    Salem is a nice stable market with attractive price to rents in the core but houses are older.  I may do one as a trial, we spend a fair amount of time in salem.... The guys have had a fair number of investors on the blog that invest in the Vancouver/Longview areas. I do all my buy and hold investing 45 minutes to an hour drive  away from my home.  Its not too far and i dont have a daily commute so it doesnt bother me at all.  And i drive that far to mow lawns (yard guys are stupid expensive in seattle area).  If you take the annual cash flow and divide by the time you spend traveling to units it makes it feel better.  That being said if the market is telling you to flip or do something else do it!  Dont do buy and hold just cuz somebody told you too or because you see people doing that here.  As my econ prof said "The supply and demand lines don't lie"

    1Reply
  • Sunny Lamba
    Investor · Chicago, IL · Member since 2014 · 16 posts · 3 votes
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    @Bill Horton Have you looked into turn key opportunities in different cities? Chicago is the third largest city in the nation and has an abundance of Multi-family, (duplex/triplex) units that will generate two to three leads for income.  Helps on the vacancy rate compared to a single family when you are doing a tenant change over and/or minimizing risk if you only have 1 unit rented out... 

    0Reply
  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    I think I will do some flips in the Portland metro area and will buy rentals in another market. I will definitely look into Salem or Longview areas, but may end up going to another market.  Thank everyone for the feedback.  

    0Reply
  • David Hood
    Houston, TX · Member since 2014 · 29 posts · 7 votes
    11y

    I'd bet there are properties to be had within a 45 minute drive of wherever you live. You might have to adjust your thinking to find them. Don't just look at properties where you'd want to live. Look at where the numbers work. The sexy areas are a gamble on appreciation, I'd look for cash flow.

    I'm in Houston and can't touch anything within a 5 mile radius of my house where rent numbers work. Most nearby stuff that sells for $300k only rents for $1500. However, if I drive 20 miles I can buy 5 SFRs for the same $300k and gross $5000 per month. 

    1Reply
  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    Thank you David.  I will keep looking! 

    0Reply
  • Michele FischerPro Member
    Rental Property Investor · Seattle, WA · Member since 2013 · 2k+ posts · 1k+ votes
    11y
    Originally posted by @Bill Horton:

    I think I will do some flips in the Portland metro area and will buy rentals in another market. I will definitely look into Salem or Longview areas, but may end up going to another market.  Thank everyone for the feedback.  

     Bill, if you are interested in Longview, I can provide some insight, when/if you are ready.  I think I'd look at Salem first, Longview has some challenges.

    Podcast Guest on Show #79
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  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    Thank you Michele! Just looking on the MLS, Longview looks very appealing based on prices and rents. I'm guessing there are probably a lot more job opportunities in the Salem area though.

    0Reply
  • Mike NussPro Member
    Real Estate Entrepreneur · Portland, OR · Member since 2014 · 451 posts · 328 votes
    11y

    In my opinion there are 5 excellent ways to get cash flow in Portland

    • be proactive
    • do not buy off of MLS
    • buy under rented properties
    • do value add through rehab and rent increase
    • self manage your units

    Portland is an interesting market. The romantic areas of town start at 5 caps and go down from there. It's tough to provide cash flow when the return on NOI is the same as the interest rate you're borrowing. That in and of itself means you're only getting the 4-5% return on the downpayment you've made.......unless you add value through rehab and rent increase. $400 a month more in net rent = $96,000 in market value (assuming 5 cap). That type of value add is really easy to do in Portland (most rentals in the midwest won't ever reach 96K in value, where as that is a common value add in Portland). However, most of the MLS properties do not have that type of upside. If they do, they end up getting bid up beyond the value add you want to make.

    The best part of the romantic properties and close in areas is the tenants these properties attract. We have multiple 800+ credit score tenants, all with $ in the bank. They sign their paperwork, move in, pay rent on time if not early and are rarely heard from again. Most of the work is in the lease out. Saving that 6-8% in monthly property management (don't forget the expensive lease up fees) is significant in this market as the property management typically makes just as much if not more cash flow than the owner does in NOI.

    @Bill Horton  you're sitting in a potential gold mine there in OC. Just my opinion, but there are a ton of vacant homes in the historic areas of OC close to downtown. Urban Renewal has done a ton for the downtown area and the developer from Tacoma is going to make waves with his Blue Heron Paper Mill redevelopment. It's probably worth your while to send some letters out in your backyard. 

    Podcast Guest on Show #548
    4Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    11y

    I agree with 

    0Reply
  • Rusty Thompson
    Real Estate Investor · Salem, OR · Member since 2011 · 422 posts · 149 votes
    11y

    I agree with @Mike Nuss about Oregon City. I remember looking at housing prices up there a couple years ago and saw ratios close to what Salem is showing. I think it is a natural reflex to think the grass is greener on the other side of the fence. Sometimes its true, sometimes its not. 

    1Reply
  • Bill Horton
    OP
    Real Estate Broker · Canby, OR · Member since 2012 · 127 posts · 37 votes
    11y

    @Mike Nuss I couldn't agree more about the potential for appreciation in OC right now.  Especially with the result of the election, I think they we are going to see some explosive growth.  That developer bought the mill and will likely but in a large mix-use development.  Last I heard, a California developer is interested in the dump where The River's mall was going to go.  Also, they have plans for a large mix-use development, marina and amphitheater in the Clackamette Cove area.  They are also selling off the land across Beavercreek Rd from the high school, which is part of the Beavercreek Development Plan. There will be a lot of new apartments going in with some of those developments but potentially many new jobs with the others.  

    I think you are right about not buying off the MLS too... I have been looking there because it is easy. I really need to get out there, be proactive and start sending some letters. I'm definitely interested if I could get a small multi-family in OC and add value. Thank you for the good information!

    0Reply
  • Omid A.
    Flipper/Rehabber · Portland, OR · Member since 2014 · 119 posts · 121 votes
    11y

    @Bill Horton I am in the same situation as you are. I, too, am wanting buy & holds in Portland but now realize that price to rent ratio just does not work on any listed properties. Only way you could possibly achieve positive cash flow in this hot seller's market is by finding off-market properties at a fair discount, adding value and then holding it from there. 

    If you have the capital to take on rehab projects in PDX then go for it, but you may find that the numbers work much better 30-60 minutes away from the city. 

    If there are any Portland flippers out there I am very interested to hear what the numbers look like on their flips with respect to home prices. I remember reading a post from a BP flipper in SoCal who mentioned that the margins worked tremendously better in the 650k+ range, as opposed to the lower priced homes in that market (not sure if this is accurate, just citing a post from who seemed like a reputable investor). I wonder if this is the case here in Portland.

    0Reply
  • Mike NussPro Member
    Real Estate Entrepreneur · Portland, OR · Member since 2014 · 451 posts · 328 votes
    11y

    @Bill Horton you know your OC....one huge reason to do some direct marketing there. I get asked all the time why we don't invest outside of Portland. Simple answer is I'll know a fraction about another market compared to the depth I have for Portland. I believe in investing where you have knowledge. 

    I have mixed feelings about Clackamette Cove. Common paddle boarding spot for the fam and I. I think the water is too low in the Clackamas right there to make sense for a marina too. Although, mixed use makes a ton of sense right there with the land north of Fisherman's Marina. 

    Podcast Guest on Show #548
    1Reply
  • Justin Green
    Real Estate Agent · Portland, OR · Member since 2014 · 74 posts · 37 votes
    11y

    I am in the early stages and building a portfolio of buy and hold properties in the metro area. True most stuff already public listed at a good price goes very fast with multiple offers. There is a small window of time before stuff goes public that a good deal can be had. Early on I am happy to cash flow very little with delayed gratification later on. The 1% rule, I have yet to see someone pull that off here, Maybe Mike has heard of it happening.

    For a comp I am considering one that has a heavy rehab cost with a $150 a month cash flow to start based on self management, high rehab estimates capex, and low rent projections. that way most errors are in my favor with multiple outs. I have a goal of 20 doors in 10 years. And the above is just rough numbers worst case.

    I deal with the "metro ring" in pricing everyday. The rental numbers are also relative. The further out you go the less the numbers are.

    I look at it if I can start out making a few hundred a month I am happy with that. Build up a large emergency fund. Over time your investments will work for you.

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