Portland, OR - Sell or rent out house?

8 Replies


My wife and I live in Portland. We are going to be buying a new home in the next few months. We have owned the home we live in for 3.5 years. I'd like to keep it as a rental property. We will either be moving to SW Portland to a better neighborhood or down to Corvallis to be close to family. Corvallis wasn't previously on the table, but with Covid-19 we are considered moving closer to family so that we can have more help with the kids. It would also be nice to get out of the City and they have amazing schools.

Can you provide some feedback on my analysis on whether I should rent our house or sell it? I am pretty heavily leaning towards renting it out, but I'd like some more eyes on it in case I am missing something. 


Home location: NE Portland, near max line

  • Approximate Market Value: $380,000
  • Loan Balance: $325,000
  • 4 bed, 2 bath
  • 7,500 sq. ft. lot
  • The roof will need to be replaced in a couple years. Garage door needs to be replaced.
  • Most appliances are newer. Washer and dryer would need to be replaced for renters.

Monthly Costs:

  • P&I: $1,305
  • Property Tax: $294
  • Insurance: $70
  • Mortgage Insurance: $63
  • Garbage: $40
  • Total monthly payment when rented:  $1,772

Monthly Rent:

  1. Range $2,200-$2,400 * 5% Vacancy = $2,090 - $2,280

Cash Flow before repairs, capex, and taxes:

  • Monthly: $318-$508
  • Annually: $3,816 - $6,096

Cash flow after repair and capex, before taxes:

Assume a reserve of 10% of rent for capex and repairs: $240

Monthly: $78 - $268

Annually: $936 - $3,216

Other Factors:

We would probably spend a couple thousand dollars less getting the house ready to sell vs. rent. There are some appliances that need to be replaced and we need a new garage door. If we sell, I probably wouldn't replace them unless the RE agent thought it would add more value than it cost.

I would also self-manage. I'm an accountant and I like learning about rules, systems, and all that boring stuff that other people don't like, so I'm not worried about learning the complex housing rules.

If we stay in Portland, I might also rent by the room. This would increase the total rent we could by a few hundred a month, but it would be more work.

Pet rent could be anywhere from $35-$100/mo. I am debating allowing larger dogs for a high pet rent. Large dogs aren't allowed very often as far as I can tell so I think there could be high demand for it.

My analysis:

We sell home for $380,000. Subtract out our outstanding loan balance for $325,000, commission of $22,800, and $2,000(?) of additional costs during the process. We end up with $30,200 (380,000 - 325,000 - 22,800 - 2,000).

Cash on Cash Return: 

  • Low-end: 3.1% (936 / 30,200)
  • High-end: 10.6% (3,216 / 30,200)


    • Year 1 - Principal: $7,140
    • Year 1 - Interest: $8,445

  • Low-end: 26.7% ((936 + 7,140)/30,200)
  • High-end: 34.3% ((3,216 + 7,140)/30,200)

Also, the mortgage would be paid down by $7,140 in the first year and more each year after.

What are your thoughts on this? What if I had to add in a property manager? Would it still be worth it?

Thanks for any feedback you can provide!

What is your current rate? When was the loan originated? When looking at the returns for a low down option like this, its hard use percentage returns. Yes, $936 on an invested equated of $30,200 is great as a percentage, but in reality running SO close to the sun. From a buy/hold perspective, we need to look at your After-tax and Principle Pay Down as a return and quantify the capital/equity growth, since cashflow really isn't the play. 

We are actually at the very end of a Refi. Interest rate will be 2.625% on a 30-year loan. I am getting a few thousand in cash out as well, even though I'm not at 80% LTV. Equity pay down in the first year will be $7,140.

I did the tax calculation and it will increase our taxes even with depreciation. Land makes up too much of the value. We are at a 31% tax rate between state and fed right now. So tax might end up being $1,800/year.

Another side goal I have would be to leverage the equity in this property to buy other investments in the future. So I also see this as a potential "bank" through the use of a HELOC or something similar.

So taking these into account and assuming $0 cash flow to be conservative.

  • Principal pay down: $7,140
  • Tax increase: $1,800
  • Year 1 net return: $5,340 
  • $5,340 / $ 30,200 = 17.68% return on capital

Another scenario is hold it for 4 years. Let tenants payoff $7,140+/yr of mortgage and gain appreciation. Then sell for no tax since we would satisfy the 2 out of 5 year rule.

When deciding to keep a property or sell, you should also think about how you feel about owning this property for a few more years.  You know your home better than anyone, are you ok with all the "little things" about it vs. going into an unknown property?  Renting it out by the room will hands down be your best option but will take more management on your end.  In my personal opinion, I think you should rent it out (by the room or as a unit) and purchase something in Portland or Corvallis.  With interest rates this low, you will be glad you did.  

@Brad Hammond

thanks Brad.

I fee very good about renting it out and bearing the repair costs as opposed to buying an unknown. We bought the house thinking we would split it into a top/down duplex, but we have moved away from that idea. So renting it was the goal from the beginning.

My big concern is Portland rental laws. Although, I have heard that many of the newer laws don’t apply to landlords with only a few properties.

I’m really just looking for validation that it is a good investment as opposed to selling and reinvesting somewhere else haha.

You are correct that the rental laws are strict in Portland and you would be excused from a lot of those since you only have the one unit.  Yes, this would be a good investment but what are your long-term investment plans?  This home could easily be worth $425k-$450k in 5 years or you could be making more monthly cash flow in Corvallis.  If you are at all thinking about selling within the next 2-3 years, now is the best time to do it. 

@Brad Hammond

My plans are buy and hold, but I'm not adverse to selling an investment with low return on equity. For now it seems like this has a high return on equity and is worth the risk of holding, even in the Portland Market.

This house is the first step of my long-term plan. I have 2 real estate investment paths that I want to pursue: 1) buy multiple primary residences with low down payments for equity growth and 2) buy cash flowing properties in cheaper markets. 

I want to buy a new primary residence every 1-2 years for the next few years until my kids get older and it's time to settle in one house until they graduate high school. This will be in Portland Metro or in the Corvallis area. These investments are focused on the long-term equity growth through appreciation and mortgage pay down. Plus, I assume they will turn into cash flowing properties eventually with inflation and rent growth. We bought the current house with 3% down. If I can do that with multiple houses then I feel like it is a great opportunity to build a lot of equity without investing a lot up front. I just need to keep a healthy cash reserve from my wages on hand because the properties won't be cash flowing well.

For the cash flowing properties, I want to buy one between buying each primary house. So an initial goal of 1 house a year'ish alternating between primary and rental investment. I am warming up to the idea of long-distance investing, but I feel more comfortable having a property close by that I can check on and do my own property management. I am thinking about the Salem market for that. It seems like property values haven't increased there as much and there is more potential to get a deal. I'm also starting to look at smaller towns around the mid-valley or north along highway 30. Diversifying in 2 states isn't a bad idea either. Especially with the big earthquake coming tomorrow or in 100 years haha.

Why do you think that if I am thinking about selling in 2-3 years that I should sell now? Do you think the market will drop? If we do hate having the property or it turns into a renter caused money pit I'd definitely think about selling here and looking for greener pastures.

What is your strategy for leap-frogging from primary to primary? Equity loans or just straight cash savings for down payments? I am deeply committed to buy-and-hold strategy as well, just not sure how feasible it is leap frog without oodles of equity or cash saved over time.

@Christopher Bello

It’s primarily to get buy and hold properties for as little money as possible as quickly as possible. Then the tenants pay more of the mortgage, I have less of my personal equity locked into non-cash flowing Portland homes, and I have more properties that will appreciate. It’s definitely a long-term strategy for wealth growth.

I just finished my refi. I did not realize that the 1 year occupancy clause applies to refinances. So I guess I’ll be in this house for another year to wait that out. I’m building my savings and looking for cash flowing properties until then.

I’m thinking about doing a direct mail campaign to a couple areas I’ve been looking at to see if I can get something off market. I think now is probably a good time to start because some landlords are going to need help with trouble properties due to the eviction moratorium and some homeowners will need help if they can’t pay their mortgage.