Who's BRRRing multifamily in Portland?

15 Replies

Just curious, is anyone on here actively brrrring commercial multifamily properties in Portland? What do you look for in a potential investment? How are you finding your deals? 

I invest in value-add multifamily OOS but it seems like a whole different animal in PDX. 

I personally have stopped looking for rehab project in City of Portland for a while due to tenant activate groups and constantly changing PDX ordinances. It only gets ugly with Tina Kotek onboard with rent control and killing non-cause eviction in the future. I would look for Washington State or at least to stay away from City of Portland for rehab if possible. Contact brokers for pocket listing is one of the options. Thing that I don't like going to Loopnet or any public platform like RLMS etc anymore is to avoid bidding war.  

I actively brrr multifam in PDX. I think multifamily is actually easier than SFR, because repositioning the rents has an exponentially larger effect on immediately bumping your equity position and allowing you to get your money back out quickly.

I look for properties that have opportunities to add value both short term and long term.  

  • Short term = depressed rents, deferred maintenance, vacancies and violations.  
  • Long term = expandability, upcoming zoning changes, additional density opportunities, or neighborhood appreciation potential. 

I've found most of them through working with sellers that own multiple properties, and being the most easy and fair option for them to keep coming back to as they liquidate.

Initial contact with these sellers is usually made through direct mail or word of mouth.  Seller financing and private equity partners have also helped this strategy work. Getting all the capital improvements done before it is ready to refi can be pretty expensive!  

If there are any other specific questions you have about employing this strategy in Portland, let me know!

Originally posted by @Kelvin Lee :

I personally have stopped looking for rehab project in City of Portland for a while due to tenant activate groups and constantly changing PDX ordinances. It only gets ugly with Tina Kotek onboard with rent control and killing non-cause eviction in the future. I would look for Washington State or at least to stay away from City of Portland for rehab if possible. Contact brokers for pocket listing is one of the options. Thing that I don't like going to Loopnet or any public platform like RLMS etc anymore is to avoid bidding war.  

Yes that can be scary, but you can still get projects pushed through at Portland BDS, and landlords and investors can still make great money here.  The Oregon State legislature actually is proposing a bill that will put rent control in place in a much more restrained and reasonable measure than what City of Portland wants to implement.  In my opinion, the Senate's proposal is reassuring because it will reign Portland in and stop what has seemed to many like an unrelenting war against landlord's rights.  

While you can definitely find better rates of return in the short term in other markets, I'm a big fan of the steady inbound migration, appreciation and stability that Portland proper has to offer.

Please define 'brrr' for me.  Thanks.

@Tyler Combs , that's encouraging to hear you've still been able to find projects in Portland. I have two questions about how the rent control law will impact you.

First, while the law lets us give a no-cause notice to tenants to remodel their unit, I believe we will still be limited to the normal 7%+index annual increase. The only exception I can see is if the tenant leaves on their own volition, or if we give them a for-cause. Does this leave you any more motivation to remodel apartments?

Second, are you worried that the 7% figure will be incrementally lowered in the future? And do you think property values will be impacted, as investors become reluctant to pay such low CAP rates for properties with limited rent upside?

I'm worried for our Corvallis rentals, but it seems like someone doing what you do will be hit the hardest by this.

@John Chapman , BRRRR is Buy, Rehab, Rent, Refinance, Repeat. It's a strategy to end up with minimal cash invested after doing a cash-out refi, but it's getting harder lately with tight rules for cash-out refis.

I was and I stopped about a year ago. Money can still be made but the market is too hostile for me to want to deal with. I'm looking for semi-passive income, not a full time job keeping up on the ever changing laws or dealing with the new breed of entitled tenants it's creating. 

We've done some houses and a few duplexes (mostly houses with ADU's). It's tricky to get them to cash flow, but they can in some the less expensive neighborhoods, which is probably the best place to look.

Got it.  Thanks.  Been doing it for many years-- didn't know the acronym.

Originally posted by @Zach Davis :

I was and I stopped about a year ago. Money can still be made but the market is too hostile for me to want to deal with. I'm looking for semi-passive income, not a full time job keeping up on the ever changing laws or dealing with the new breed of entitled tenants it's creating. 

 That's a really good point about the effects of the approach the city has taken.   It has increased the liability exposure for self-managing landlords to a point where most probably should hire a professional property manager that stays up on the law changes.  By doing that though, you often end up cutting your net income in half.  Many have chosen to hire a PM or sell. The irony is that it was these self-managing landlords that were privately subsidizing rents and providing a significant amount of affordable housing.  

Zach, where did you end up investing for semi-passive income?

@Tyler Combs What LTV are getting from your lenders here on refis? Are you keeping initial capital in properties after the refi or are you able to pull everything out? Do you foresee mean rents decreasing over the next year or two as more inventory comes online?

@Andrew Syrios Are you investing in KC right now? I've just recently started acquiring small multis out there, KC is great! We should chat sometime.

Originally posted by @Caleb Webster :

@Tyler Combs What LTV are getting from your lenders here on refis? Are you keeping initial capital in properties after the refi or are you able to pull everything out? Do you foresee mean rents decreasing over the next year or two as more inventory comes online?

I'm seeing 80% LTV as most common. I've been able to pull everything out of most of them.

No, I think we'll continue to see a slowdown in appreciation of rents, but demand is still keeping pace with supply.  We're seeing builders give concessions as the struggle to reach their proforma goals, but I think we're looking at stabilization in the near future, not decline.

@tyler combs

For the moment I'm funding IRAs, saving for a future opportunity and paying down the mortgage on my personal home. 

@Ross Leavitt I don't think property values are a concern with the rent control proposal.  You'll find  some of the lowest cap rates in the country in rent control markets. Portland is probably going to become more and more appealing to institutional $ looking to park capital. Demand will still be there and effective purchasing power will continue to increase as that institutional $ magnet grows. Purchasing properties that make sense, will get more difficult (for properties with below market rent) as you'll have less flexibility with a rent control ordinance. But they will still be out there. That being said, looking out of state is getting more and more appealing though. 

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