Portland, OR rental market - Am I naive?

10 Replies | Portland, Maine

I am looking to buy my first rental property - highly considering multi-family units. I just had a conversation with a real estate pro today. 

The vibe I got from my conversation this morning was that the Portland market is not good and that I should look elsewhere. While that may be a possibility in the future, I would prefer to have my first property nearby so that I can easily take care of the place and learn.

Am I naive to think that I can find a good deal here that will give me positive cash flow?

Should I really look elsewhere? 

What is the landlord's perspective of the new rent control laws? Is this really a reason to run away from investing in Portland?

Thanks in advance for any insight that you may have!

also some of the laws wont apply to owners with 4 ot less units.. but do bone up on the rules.. if everyone is running you want to enter the market

I agree with @Jeff S. If you feel naive, or that you're possibly being naive, get educated enough to not feel naive (whatever that takes). Everyone needs to get educated anyway, none of us learned this stuff in school, so get to the point of feeling confident in knowing why you're going forward on any particular deal.

I seriously doubt you'll find cash flow in Portland.

Not sure the rent control laws in OR, but if they're anything like they are in Los Angeles, they can be detrimental to an owner, yes.

@Josh Gardner your success in finding casfhlow in Portland will directly correlate to the effort you put in on finding an off market purchase. I've built a significant portfolio (85+ units) in Portland within 7 years time, all purchased off market. 

If you just look at on market properties, the likelihood you find something that makes sense is low. The new rent control laws actually offer a lot of opportunity right now. I hardly bought anything last year (3 rental units), but am already on a pace for record # of units this year. It's all about the effort and recognizing opportunity. 

@Jay Hinrichs the 1-4 unit exemption in the Oregon rent control bill is solely an exemption of paying one month relo fee (if you use an approved reason to no cause terminate). It does not exempt those owners from rent caps. The new law is nuanced to say the least, but it definitely aint no LA/San Fran rent control policy. 

@Josh Gardner Study up on the Portland rules. I'm in Washington and read that there is a lot of regulation coming down, but I stay in my rural county to keep away from all that. I love RHA of WA, so maybe https://rhaoregon.org/ will help you understand what the real estate pro is talking about

Look at your goals and what you want. I learn the fastest by going with my gut and got my license to be able to evaluate deals faster, and build my own portfolio. That is not to say that it is good to make costly mistakes, though without expectations, follow through, and the data, most of the talk is just conjecture. Get out from behind the computer and smell some of these homes, make some offers, get denied again, and again, and again. That experience will teach you what you need to know to find good deals.

I.e. I ignore all the "rules of thumbs" because they don't really apply in this market imo because of the nature of it, decent appreciation, lower cash flow, etc. Heck, look at the building going on in Clark County - it is insane. Are rents going to go down? Maybe in short-term only, but not long-term, there is just not enough housing for the demand. @Jay Hinrichs  is right, go where people are running from and you will find deals.  

I don't know other markets, so I stay here. 

Personally, I don't bother with hunting for off-market deals as I just don't have the time or energy for it. I have tossed thousands of $$ and many many hours into it, and the ROI is just not there for me. I just don't have the time or energy to chase the potentials. Better ROI for me is playing the agent card and while I am looking for others, also look for myself and go sniff these homes. I needed to make a few bucks (above my W-2 job) to even start investing and found a niche offering discounted fees for sellers, and primarily helping friends and family. Think about it, even if I only make $5,000 of profit (not income, profit) from agent fees annually, I still make more than most landlords with 1, or a few SFH properties. And I am not ready to venture into MFH yet. For purchasing, I prefer to look at homes needing TLC from the MLS and see no problem paying retail because the appreciation always makes sense after 1 year if I can get a property with rent at a level where the debt service coverage ratio is 1.45 or above. If I can find cash flow, so can you. You just have to keep your eyes wide open and jump fast when something comes available that you want, because the market moves very fast.

@Josh Gardner   There's cashflow properties here.  They aren't duplexes or triplexes (if on the market).  Like @Mike Nuss said above, you have to do the work to find the off market gems.  I think SB 608 is actually going to provide quite a bit of opportunity, though you will need to be doing more value add deals than turn key.  

I think it will take a few months for sellers to figure out their values with the inability to bring rents to market levels.  That's when I'd make moves.

@Josh Gardner I don't know the Portland market well but what I do know is that it has gotten very expensive. I suspect that you'll find that it doesn't cash flow well. What I recommend is to clearly identify your criteria and financial objectives. If your market fits those objectives, that's great. If it doesn't, don't start compromising your objectives to fit your market. You're far better off finding a market that fits your goals than to sub optimize your investment from the start.