How to navigate high priced markets

Question

Hello investors! I am trying to figure out how those of you investing in high priced markets are able to get into properties that are able to cashflow?

The current obstacle I am running into is that if I finance a deal, even with a great interest rate and no mortgage insurance, I am not cash flowing. Finding tri-plex and quad-plex in this area that aren't $850k+ is rare and financing that amount would probably leave little room for cashflow anyway. I've been focusing on properties with basement apartments that would offset my mortgage (if I live there) or properties that could use cosmetic updates in great areas.

I am new to the game. So far I only have my house that I purchased in 2018. Once I get some renos done on that I will have some more capitol... but I just can't figure out how to get going in my market.

I am in Portland OR for reference.

Thanks all!

Alex Mora · Answer

Hey @Kayla Carson

I am actually investing in the same area as you and also possibly doing the same strategy.

The way I look at it when it comes to house hacking is whatever the dollar amount that's left after all expenses, if that figure is more than my current cost of living, than I am losing money. If it is less, than I am cash flowing. Any money saved is earned money, hence cashflow.(Specifically house hacking) I can share with you my analysis that I have done and that may give you a better understanding of what I mean. Feel free to msg me anytime. Best of luck !

Brett Chandler · Answer

@Kayla Carson I'm a lender in your local market, and I know what you mean! Are you planning to keep your current primary as a rental, or sell it? Sorry if this is an over-simplification, but if you're willing to share your house, I like the idea of house hacking because you can purchase as an owner occupied vs as an investment property. That allows you to have a smaller down payment and better interest rate. Then, with your living expenses being offset by the rental income, you can save up a down payment for your next house hack. You are allowed to have up to 10 conventional mortgages, so as long as you live in the house for a year, you could continue this process until you have built up a pretty nice portfolio of cash-flowing properties. Of course there are a few more factors at play on the lending side, happy to get into some more specifics if you have any questions.

Alex Mora · Answer

@Kayla Carson totally understand what you mean. I'm on the same boat as you. Shoot me a msg whenever you have time and Ill share one of deal analysis so you can see what I look at or how I look at it for the most part and it might help you out. If it doesn't either way Id be happy to be bounce off ideas.

Brett Chandler · Answer

@Kayla Carson I hear what you're saying. The margins are definitely slim in that price point. The equity growth would be nice, though. Your cash flow would be better with a bigger down payment and no PMI, but your cash-on-cash would take a hit. I wonder if there would be any cost savings if you bought an owner occupied SFR and added an ADU? There would obviously be more work involved, but it might be an option. I'm also interested in what @Rachel Luoto had to say about the zoning change. That's not something I'm super familiar with but it would be cool to do a BRRRR SFR to multi-family conversion.

Rachel Luoto · Answer

Hi Kayla,

Have you considered Portland's elimination of single family zoning? That's something I'm really interested in! So there is the potential now to convert these large SFRs into duplexes. Or you could consider renting by the room as well.

Kayla Carson · Answer

@Brett Chandler

@Brett Chandler Yes I will be keeping my current home in Hillsboro to rent out. I will probably get $300 cash flow on that monthly. I am down to house hack, but when I decide to move out of that house, it seems to me like renting out both portions of the house will barely cover the mortgage. Maybe I am missing something... It seems to me like the price point for finding a multi-unit or a house with a basement apartment or ADU is in the $600's which leaves little room to cash flow. I don't want to get discouraged from investing in an area that I love, but I am not seeing the upside yet? The equity portion is nice, but doesn't allow me to scale quickly ya know?

Kayla Carson · Answer

@alex mora thansk for the reply! Yeah I'd like to see exactly what you mean. I'm considering cash flow as anything I get after all expenses. Currently most of the deals I'm finding listed publicly are not doing that. Ex: found a house with a converted basement apartment. If I house hack that, obviously my mortgage will be off set,  but not eliminated. If I moved out and rented both. I'd barely be breaking even on the mortgage payment.

How to navigate high priced markets

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