As some of you may know there's a large development in the suburbs of Portland called "South Hillsboro" that's slated to add something like 8000 residences of all types (mix of SFH and multis). This will expand the city of Hillsboro to possibly become the 4th largest city in Oregon.
My question to the more experienced investors out there is this; what will this mean for the surrounding areas. Mainly older Hillsboro and Aloha/West Beaverton. These areas have lower costing homes and with that, lower rents. Will a large new development push these home values down, or will rising tides raise all ships? Will rents typically stay the same, or will a large influx of new homes and multis force prices down (and/or vacancies up)?
Any thoughts on investing in the surrounding areas in general?
its rare in this market to buy new construction SFR's for rental purposes... it happened a bunch in 03 to 06.
as well as our renters in this market unlike many other markets of the mid west.. they rent apartments not SFR's granted there are sfr rentals but not nearly to the extent in other markets.
99% of the new construction will go to homeowners.. this could cause over supply of apartments though in the area.. it will depend on jobs. like it always does.
I have a townhouse i bought as investment 3 years ago, just on the opposite side of The Reserve and on the boundary of South Hillsboro. Right now I am seeing crazy appreciation in the value of the property as well as crazy increases in rent. I have a section 8 tenant and just submitted an increase in rent request that was 25% more than last year. This I attribute to the whole lack of housing in the metro area. Likely Portland's housing issue spilling out in the suburbs.
Personally, I think it will continue at least for a few more years, and mainly because of South Hillsboro. If they create something along the lines of the Orenco area, I think it will draw a lot more people closer to that section of town as well. New businesses, new shopping options, new homes - people will want to be close to that area. Once they start getting close to the total number of houses to be built, I will be watching closely for any signs of a softening market and then get out.
The biggest issue is whether you can buy something at the current prices and make the numbers work.
Thanks for the input @Jay Hinrichs & @Jeffrey Wannberg . I'm still kicking myself for not jumping on a duplex pretty much cross 209th a couple of years back. At the time the rent numbers would have made it tight to break even, today I'd be pulling in good cash flow with a couple of years of mortgage pay-down and extra equity. Where's Doc and Marty when you need them?
My thoughts are that the typical buyers and renters of this new development will be different than the renters of the areas surrounding it so it could sustain the same or higher rents by being close to the new amenities, but not as expensive as new. On the flip side the additional traffic (T.V. highway is bad enough now, add 20k residents and watch out) and the availability of nicer homes nearby might disrupt the values around the area.
As they say the only regret is not doing it sooner, and I feel that regret all the time. I don't want to feel it again in a few years, either way.
they should have annexed in the property on the northside of Hillsboro first.. traffic is better now all these new people will have to take surface streets to the get to the freeway.
now of course I optioned 105 acres on the north side a few years back so I am a little prejudice there on my thought process
Another option you might think about is a vacation rental. It is certainly different than a month to month, but we switched to that market last year. If I had more money, that is where I would go again.
We bought a place just south of Lincoln City a year ago and remodeled it. The reason I suggest that is that I think the prices over there have not bounced much off the bottom since 2008. They are still depressed to the point you can find pretty good deals. I have houses on my watch list from last year that still haven't sold.
We spent the first 9 months remodeling it and added it to the rental pool Memorial Weekend. The manager had it rented for most of the summer (all but about 2 weeks). We just finished phase 2 renovation about 2 weeks ago, so we are done sinking money into it. But it gave us a separate suite as well as increased the capacity - equals more money!
We are still picking up a lot of weekends and already have Thanksgiving and Christmas weeks booked. Right now it looks like we will be able to do about $26k in revenue this year and likely a little over $40k next year. Once we get more return clients we will are expecting to be in the mid $50k in revenue.
I also think the values will increase in the next few years. For one, Portland and the Metro area are growing considerably. People in that area will start looking for investments outside of that area as well as second homes. Lincoln City is about 2 hours outside of Portland, which that 2 hours is key.
Even with no appreciation, our investment still makes sense. Give that investment a look as well. Feel free to contact me about our lessons learned. We have learned a lot about location and there are particular ordinances in Lincoln City you need to stay away from.
Yes Lincoln City has been trying to 'fix' their vacation rental rules for several years. As it stands right now you can only have 1 vacation rental within the city limits. Unless they changed that this month and I missed it.
@Jeffrey Wannberg in your experience how important is it to be within city limits when searching for coastal vacation rentals? When you say "just south" of Lincoln City, do you mean outside the city itself? Have you found it's important to be close to grocery stores or are renters still happy to rent outside the city and making a trip to the grocery store / casino. How happy have you been with property management companies in the area?
When we originally started looking, I was trying to get close to the casino. Particularly in the roads end section of town because I thought the casino may bring more renters. But we couldn't make any deals work up there.
We ended up in Bella Beach, just south of Salishan. I am really glad we did end up there.
I really wouldn't try to buy inside Lincoln City, but close to it. There are just too many issues such as their vacation rental districts and summer traffic. When we first started it was April and traffic was not big deal, by summer, trying to get in and out of town is horrendous. So being south of town seems like a good place because you can easily get everywhere.
The items we ended up using for criteria ended up pretty simple -
- Within walking distance of beach
- Ocean view or ocean front
One of the things I did was research the nightly rates for all the houses I could find. I found that ocean front houses rent for more than those that are not. However, I found that houses that are higher quality (nicer) rent for the same amount as ocean front, particularly ocean view and walk able to the beach. So finding a house close to the beach and upgrading it, would result in a better investment.
As for managers, well we just fired our first one. She was effective, but I just couldn't work with her anymore. So we have changed to a new company and will see how that goes. I will warn you that the beach mentality is very different than the metro area. It is very hard to find people to work on your house, etc... unless you already know people. During the remodel I found it much easier to find companies in Salem and have them come out to Lincoln City.
The other thing to factor in, is the going rates for property management is about 30%. The company we just switched to is 35% but they market a lot more places, cover hot tub maintenance, as well as the stockable items. But that should get us more people staying at the house.
So we will see what happens this next year.
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