Interested in buying in the Portland area

8 Replies

After a few years away, my wife and I have moved back to the Portland area with our baby girl. We're hoping to buy a duplex or a detached SFH with an ADU/mother-in-law apartment. We want a walkable enough neighborhood, and I want a reasonable commute to work (<40 minutes).

I haven't noticed much multi-family inventory in the markets we are most interested in -- Sellwood, Woodstock, the Morelands. We're most interested in small duplexes. Triplexes and four plexes are likely too much for us to chew off at this point. I am now considering more seriously a detached home with ADU or with ADU potential (Perhaps a basement). This property is not just an investment, but one that we plan on living in. However, I still want it to make financial sense. I'm willing to pay more for a turnkey property, but there seems to be few of those available.

I'm wondering about the feasibility of converting a basement or garage into an ADU for that extra income. If so, can anyone guide me in reasoning how much this should cost so that we can keep our total cost down to our price targets (

On the other hand, I'm not sure if we need to wait longer for inventory to become available.

Additionally if anyone has any back of the envelope calculations or tips on how to choose an owner-occupied duplex / SFH with ADU, that would be appreciated. I'm not sure if the 1 percent rule really applies in the PDX market, but we're kind of committed to living there, as we have family and I work downtown.

I guess finally... are we going about this the right way?

This post has been removed.

The 1% rule is a little bit of a myth in desirable areas. Good deals generally are around .8%, but usually that's with proforma rents. The reason it's a good deal is because there's some problem to solve at the property and after you solve it you can charge market rent.

We have a duplex listed for sale in the Brooklyn Neighborhood which is close to where you mentioned at 3440 SE 8th Ave.

It is becoming a little bit less of a seller's market in Portland. We do have a house in contract in SW which would be a perfect house to convert into a duplex and/or build a tiny home on it. I'm not 100% sure if it will close, so I'll reach back out if it comes BOM.

Let me know if you have any questions or if you want help looking, I know a few buyers agents that work for me who are very knowledgeable about investment properties!

Cheers,

@Travis Athougies

Welcome back to Portland!! and congrats on the growing family!


A couple thoughts on your post:

1. Since you're combining strategies, with one large goal to take care of your family, I'd worry less about the financial sense of the deal and more about the life sense of the deal. I know that goes counter to what many would say, but from your post you seem more concerned with having a great life for your family (easy commute, walkable, safe, etc). So I'd start with that as your first filter and then financials second. It doesn't mean you ignore the financials or buy just to buy, but it does mean that I'd focus on the life you want to build for yourselves first and then worry about the income it generates. 

2. Like Chris said, you're going to be buying someone else's problem (nobody sells a golden goose in a great location at a great price.) Portland is in a unique spot right now working through some rental regulations (both city and state-wide) that have the market in a bit of a tizzy...some are pulling out, some buying in, and some are just sitting and waiting. Regardless, our inventory levels have remained fairly steady over the last three years. We saw a spike in Q4:2018 and Q1:2019 but are back down in the low 2 months worth of inventory now which is where we've been hovering around for awhile. While I expect that to continue to fluctuate and slowly rise over time, I don't think (no crystal ball here!) that we're going to see a major change in inventory in the next 4 months...


3. As for cost to build and ADU, I'd focus more on interest rates (we're at a 3 year low) allowing you to borrow long-term money extremely cost-effectively rather than on the price to build. If you can buy in to a SFR with an ADU (there's some new builds in Sellwood that have nice ADUs) at 3.7% interest, are you going to get a better return than shoveling 100K+ of your own money into building out an ADU?

You totally seem to be on the right track with your mindset and locations and are just working through the rest of the equation!

Best of luck!


Mathew

Thanks for the response Matt. Yes. Our primary concern is for now, a nice neighborhood, for us to live in. Of course, hopefully our living sense is also one that will attract rents at a good price.

That's interesting about number 2, and something we've come to realize when looking at homes. I guess the next question is what level of problems we're willing to accept. Obviously, with the baby, our sense of danger is a bit heightened, which I think sometimes prevents us from looking at things rationally.

We're totally happy to borrow. I have a great job and we've saved up tons of money, so we're willing to pay the price to get what we want. I think you're right about building v buying. We really want to be able to rent out as soon as possible.

We've also decided to look at things a bit closer in. My wife wants me to have a shorter commute (and I don't like long commutes anyway). I think Irvington, Laurelhurst, Kerns, and Sullivan's Gulch are some neighborhoods we've added to our list. They're a bit closer to the MAX line than Woodstock. 

Thanks for the tips.

Travis

Originally posted by @Travis Athougies :

After a few years away, my wife and I have moved back to the Portland area with our baby girl. We're hoping to buy a duplex or a detached SFH with an ADU/mother-in-law apartment. We want a walkable enough neighborhood, and I want a reasonable commute to work (<40 minutes).

I haven't noticed much multi-family inventory in the markets we are most interested in -- Sellwood, Woodstock, the Morelands. We're most interested in small duplexes. Triplexes and four plexes are likely too much for us to chew off at this point. I am now considering more seriously a detached home with ADU or with ADU potential (Perhaps a basement). This property is not just an investment, but one that we plan on living in. However, I still want it to make financial sense. I'm willing to pay more for a turnkey property, but there seems to be few of those available.

I'm wondering about the feasibility of converting a basement or garage into an ADU for that extra income. If so, can anyone guide me in reasoning how much this should cost so that we can keep our total cost down to our price targets (

On the other hand, I'm not sure if we need to wait longer for inventory to become available.

Additionally if anyone has any back of the envelope calculations or tips on how to choose an owner-occupied duplex / SFH with ADU, that would be appreciated. I'm not sure if the 1 percent rule really applies in the PDX market, but we're kind of committed to living there, as we have family and I work downtown.

I guess finally... are we going about this the right way?

 With the landlord tenant laws out there in Portland I would be more inclined to just buy a house to live in and call it a day. Dealing with tenants and the local govt out there would be a no go for me. Some of the laws in Portland are out of this world to the rest of us residing in a capitalist nation lol.

http://pdxadu.blogspot.com/p/adu-class-for-homeowners.html . I recommend Kol Peterson's course for all things ADU in portland. Very informative. Ironically, it actually discouraged me from building a permitted ADU and opting for a nonpermitted basement ADU for au-pair quarters and later on airbnb (STR not allowed for permitted ADUs/duplexes etc) which seems to be a better return on investment vs. long term renter if living close-in. Most multi-families in inner SE portland are either 2+1s and likely too small for familes or so expensive they make zero financial sense.

With that said, I tried to get my partner to buy this property for us.  My loss, your gain?  Needs cosmetic updating but I think its a great deal with potential to rent to Reed students in the future.  I am not affiliated with this broker in anyway.    https://www.redfin.com/OR/Portland/3903-SE-Ogden-St-97202/home/26599214



 

I actually liked that one too, but my wife said no. As we said, the first and foremost use of this property is for our own personal use, so we are 'lucky' in that price doesn't matter so much, as long as we can afford the house itself. We're kinda tied down to the area due to family constraints, so we have to live here. The rental option is just something I want, because it'll make it easier to buy actual investment property in the future. As others have mentioned, landlord-tenant laws are not super friendly in Portland or Oregon in general.  Fortunately for us, in the kinds of units we are looking at -- attached ADUs mainly, some duplexes -- we have quite a bit of advantage in that it is going to be owner occupied. If there is a door between units (most of the ones we've seen do have them), then this is enough to trigger laws much more generous to the owner.

Anyway, I'd probably purchase actual residential investment property in other states, or look into commercial stuff.

@Travis Athougies

Your spot on about the advantage of being an owner occupier with a renter. You have much more latitude because of that.

Yes the laws are more tenant friendly than landlord friendly in Oregon now. But you mitigate that by thorough screening practices and having good relationships with your tenants.

I like your plan. It’s realistic, proven and is a good step to build wealth over the long term.

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