Buy and Hold in Portland

16 Replies

Hello,

I just found out I'm moving to Portland in the September/October time-frame and I'm hoping to get some advice.  I've always wanted to get into real estate but have been living (mostly) in Japan for the last 9 years and haven't had the opportunity to really dive in.  I own one unit through a turnkey in Detroit, this move is my first real opportunity to dive in but I'm finding that I'm shackled by the whole "I need a place to live too" thing.  I want to make a smart investment decision but I also don't want to sacrifice all the awesomeness that can come from my first time in the states in a decade.  A buy and hold strategy has always been my dream, but I guess I'm willing to shift exit strategies on this property if it makes sense to do so.  

So, TLDR: are there 'hidden gem' areas I should look at?  Are there areas to stay away from?  Are apartments any different than single family homes when it comes to viability?  And any other advice I can get I guess...this area is overwhelming a little bit haha.  Thanks in advance for the help!

Alex 

Hi @Alex F. (almost) welcome to Portland!  I think you should look into a duplex-4plex and live in one of the units. That will give you reduced or free rent while you are investing plus you can easily move out if you so desire. 

As far as areas go, that really depends on what you are comfortable with and your budget. There aren’t any war zones in Portland, just different types of markets. Let me know when you get into town and we can talk about what you’re looking for. 

Originally posted by @Alex F. :

Hello,

I just found out I'm moving to Portland in the September/October time-frame and I'm hoping to get some advice.  I've always wanted to get into real estate but have been living (mostly) in Japan for the last 9 years and haven't had the opportunity to really dive in.  I own one unit through a turnkey in Detroit, this move is my first real opportunity to dive in but I'm finding that I'm shackled by the whole "I need a place to live too" thing.  I want to make a smart investment decision but I also don't want to sacrifice all the awesomeness that can come from my first time in the states in a decade.  A buy and hold strategy has always been my dream, but I guess I'm willing to shift exit strategies on this property if it makes sense to do so.  

So, TLDR: are there 'hidden gem' areas I should look at?  Are there areas to stay away from?  Are apartments any different than single family homes when it comes to viability?  And any other advice I can get I guess...this area is overwhelming a little bit haha.  Thanks in advance for the help!

Alex 

 Welcome to the site Alex. I've always been a proponent of taking care of the roof over your head before buying rentals so I think picking up something for you to live in should be the move before you start hitting more turnkey stuff like your Detroit property.

@James Wise   I agree I think a home base that you own is important.. If not just for stability and not having someone dictate how U live in your home etc.. 

AS stated above there are no war zones in Portland..  But just like all cities there are Hoods that command more money than others and in the central close in Portland they can change by block.. 

Median home price is pushing 400k  so very affordable for west coast.. comparatively..  

Also one thing to consider is if your not actually employed in Oregon or by Oregon firm.. right across the River is the Couv and there is no tax income tax there.. dollar used to go way farther but values in the Couv have jumped the last 7 or 8 years but still good values.. 

Traffic is a major issue.. so depending on if your commuting or not that can dictate where your going to live as well. ( or want to live. 

Also I would consider joining Rarebird when you get settled its a great meetup once a month well organized with guest speakers ( plug I am July's guest speaker LOL)  

Walk score is HUGE here and the way properties are zoned take that into consideration.. for instance I have 3 homes being built now for spec right off of Freemont and Williams there is a New seasons there and huge hospital.. NO garages allowed no parking allowed on the parcels.. the city figures who ever is going to live there is going to live there for walk score and public transportation and the Williams ave Bike corridor..  these are right at 2k sq ft each price points 600k for new ..  

when you get out to the east side of town Gresham lower school scores..  new can be as low as mid to high 300s  you get on the west side of the MSA Hillsboro Intel Nike and starting prices are 100k or more higher.. 

If you can hack it buying a 4 plex if your long range goal is to be a landlord  then that's a very wise move.. they will be 600 to 1 mil in this market right about there.. 

Let me ask you these fundamental questions before going further. Do you plan on self-managing the rental? If you want to buy within City of Portland area, do you familiar with the ever changing tenancy laws and the rent control in Oregon State? How many years of experience you have on real estate rental business? What is your exist strategy, for instance, 1031? 

Welcome to Portland! You’ll find a tight and competitive market here. There are lots of strategies that can work ranging from finding a close secondary/tertiary market with affordability or getting into a house hack / room mate situation. With the prices today, it’s very difficult to find a property that effectively erases your monthly out of pocket. There are benefits behind the curtain such as a small subsidized housing cost after looking at your actial out of pocket for the pay down on your loan.

For example, you buy a $400,000 house and your monthly payment is $2200 (I’m using round numbers) and year 1 pay down on your loan is $5000 (again round numbers) OR you buy a four plex and your monthly out of pocket after accounting for expenses and rental income is $1500 and your year one pay down is $10,000.

Here you have hopefully subsidized your monthly payment to near or below marker and doubled your pay down for less money. The idea is to use financing as a tool. Let me know if you have any questions, that strategy and small multifamily is my niche in Oregon.

@Alex F.

I think your putting the cart before the horse some and not giving yourself enough credit at the same time.

You are already "in" real estate because you own a turnkey.

Every part of this market (pdx-vancouver) has its pluses and minuses. So take a look at Craigslist to evaluate rents and then look at homes or multi-family to see if it will cash flow (in the future) and then look at buying in that area.

I like Vancouver because to me has a more rural feel, population is less dense, and some would argue has "less culture", but I don't care about "culture".

Investing in real estate is still investing. It needs to make sense. I like diversification, so I also compare the returns of all my investments against each other. Real estate is about leverage which other forms don't have. Based on your goals, determines what you will do.

I.e. I have been eyeing small multi-family units. Rents for units I am looking at trend about $900-$1,200 depending on perks within and area. A mortgage with taxes and insurance before vacancy, cap exp, and pm will cost about $1,500 if I put 25% down (I already own a home in area). Add everything else in, and there is very little true cash flow. The savings really comes from the depreciation and only if I can keep my expenses low. If I can't net cash flow $3k a year (a number I set for myself) prior to depreciation the deal doesn't make sense.

In your case, you could house hack a 3-plex i.e. get in with a low amount say 5%, because you live there, (I don't see coverage of costs with a 2-plex if you live there, without supplementing with your own payments).

I use Fannie Mae Matrix as "what I can do", https://www.fanniemae.com/content/eligibility_information/eligibility-matrix.pdf

Another example, I have also been eyeing vacation properties for my family. In this scenario I want something viable for my close and extended family with the majority of living space on 1st floor. What do I really want? I want it to pay for itself. If I airbnb it, will the cash flow from it cover my expenses the whole year? That is helping me evaluate area as well because going vacation rates fluctuate.

Thanks everyone, I appreciate the responses immensely. I guess some fill-ins that would be helpful...I'm active duty military and am hoping to use the VA loan. I'll be working out of the airport, so something inside of 25 minutes drive to that would be ideal (my commute times are usually outside of rush hour...430AM or 10AM most days).

2-4plex in a decent location would be my preferred course of action.  I only get 2-3 years in Portland before I'm being moved back overseas, so my exit strategy is (ideally) to hold onto it for the long haul and use it for retirement cashflow.  I'm in no great rush to get rich...I just want to be able to comfortably not work when I'm done with the military.  If I can do that while living within walking distance of at least two bars...that's heaven.  Also another handcuff...property managers.  My job takes up 80% of my time, and I won't physically be present to be involved after my tour.  I've only owned my Detroit property for a year and use a property manager. 

Follow on questions: is the traffic over the eastern bridge to Washington as heinous as the western one? I've had friends speak of horrors. And where are the best places to actually find these properties in Portland? I've tried the main MLS and craigslist but haven't really seen much I'm extremely interested in.

I hope that answers your questions @Kelvin Lee

Thanks again to everyone for the input.  I'll happily look into Rarebird when I get to town, and I'll probably be taking a few short trips there the next few months to look around and see what I'm getting myself into.  

@Alex F. If you need you need to use property managers then consider that into the mix. Most run about 10% of rent. There are 3 sides of this. Some people use PMs, some people use software platforms for rent collection with a list of contractors they use, and some people do it all themselves. 

I don't know other markets, though in this market, there is a lot of cash and a lot of people looking to buy, so if a home is a good deal it goes fast, usually in 2-5 days. If it is under-priced it will go in a day. So for you, you I would advise finding a Realtor you like, get your financing in place and then start making offers. Like I said, finding a decently priced complex or home might take a few offers. That is just the nature of the market. i.e. I preview properties all the time because many buyers don't have "the time" before an offer is accepted. If an offer is built correctly, you will be able to get out of it after it is accepted if you don't like it (when you have time to view it).

Regarding traffic, it is what it is. It is only horrible when NOT considering other areas. Rush hour is 2:30 to 6:30/7pm every day if you are going north after work. The problem lies more in the fact that there has been no new road construction in many many years, and none more to come by south of Columbia River. North of it (Vancouver and SW Washington) is another story, different state, different infrastructure, different tax base. Yet, the traffic here pales in comparison to Seattle, or another major city.

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@Alex F. those are great commuting hours, you shouldn't have any problem coming over either bridge at those times. I-5 (west bridge), is by far worse than I-205, although that gets stacked up for miles as well in rush hour. As long as you're not in the rush hour time, you won't have a problem. 10:00am would meet that and you won't see many people on the road at 4:30am.

You should come by our real estate office when you're in town. Competition is stiff here, but if you can buy off market you'll have a much better chance of finding a truly cash flowing rental in Portland. 

@Alex F. I'm pretty partial to the Montavilla neighborhood. It's fairly close-in, has a tight-knit, diverse community with a strong neighborhood association, minutes from i84 and i205 as well as the Max lines to downtown Portland and Clackamas and median home values are low low $300s but there are still plenty of houses to be found <$300k. Houses to the west of 82nd sell for $100-200k higher for the same house!

One strategy that I really like is finding a house with a detached garage (ideally corner lot) or a large basement and then building an ADU onto the existing house. By doing this you essentially turn a single family into a duplex - just one of many ways to get creative with buy and holds in this market. Shoot me a message when you're in town next and we can grab beers.

One strategy that I really like is finding a house with a detached garage (ideally corner lot) or a large basement and then building an ADU onto the existing house. By doing this you essentially turn a single family into a duplex - just one of many ways to get creative with buy and holds in this market. Shoot me a message when you're in town next and we can grab beers.

Hey Caleb! Are you typically doing Airbnb or long term rentals with the ADU's? I'm super interested in building one for my first home, to then live in and rent the primary house.

@Caleb Webster I saw a listing last night that made me wonder about that...how much is that kind of work typically running? I have very minimal experience doing work but do have some background in project management/civil engineering but honestly that seems daunting. I imagine there are laws and zoning issues involved? That’s a whole new world on top of this other whole new world. 

@Alex F. The City of Portland is currently waiving SDC fees for ADU's if you agree to not rent out the house or the ADU as a short-term rental for 10 years. If you take that waiver you can build an ADU for less than $100/sqft, sometimes quite a bit lower if you are just finishing a basement. Detached ADU's can be $150-250/ sqft depending on finishes. There is a company (based out of Portland I think) that does pre-fab ADU's that they drop in to your back yard by crane. The sticker price is $125k for those. The company is called Dweller if you're interested.

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