When Is a bad deal a good deal?

Question

Hi ya'll,

I have yet to purchase a multi-family property for the first time, but Im looking.  Im live in the Portland metro area but wouldnt be absolutely opposed to buying out of state but lean toward buying nearby so I could potentially manage the property for a few years.  Ive looked in Portland, Eugene, Medford, Boise mostly due to their proximity and accessibility to PDX.  That said, the west coast is expensive and everything on the RMLS doesnt seem to fetch current rents that make the return very lucrative.  My strategy will be to buy and hold, whereas in my mind, rents would increase and eventually make a better cash flowing vessel but margins would be thin until that time.  In a market of rapidly rising values, is getting in to a property that "would work" a dangerous proposition or Is patience a trait most BP/experienced investors dont tolerate because geographicly there are better deals to accelerate wealth faster?  what am I missing?  Is the midwest the only area where double digit return exsists with a 20% down payment.

School me people!

Thanks,

Ken

Matt K. · Answer

takes money to make money..... Really depends on what your goals are. For example you could house hack a duplex in PDX and if you're lucky your rent would be at or maybe little below market. But it's not rent it's actually a mortgage.I'm far to broke and scared to invest locally, so I went midwest. The chances of my house being worthless in the midwest is far lower than my house locally losing equity and wiping out my "profit" or worse down payment. Plus the money I get let's me rent a nice place here locally and I get a better return than had I bought.

Jered Souder · Answer

You have to buy at a discount from market price. That's what you are missing. I recommend that whether you buy a house with market value of 30K or market value of 500K. If it was easy, everyone would be wealthy. Would you rather buy a $100K house for $75K or a $300K house for $225K? Ratio wise it is the same discount. I would be more comfortable with the later even if the former rented for $1000 and the later for $2000. This is essentially how you can make Oregon work. But I would never by a $300K house that rents for $2000 for $285K. The deal is more important than the market. What are you doing to find the deal? You won't find it on the RMLS (95 times out of 100). My last house I invested in was on the MLS for $230K and It was bought for $165K (However is ARV was $400K and a Tree fell on it while it was in escrow for $240K. I cannot count on that ever happening again).