Finding Positive Cashflow Units in Portalnd Area
Greetings Members,
TL;DR: I am trying to locate SFR units that may positively cash flow in and around PDX with maximum offering price of $325000. Is it even realistic given the fact that prices have soared within the last decade?
Details:
I have a question regarding opportunities in Portland Metropolitan, but specifically in and around Beaverton/Hillsboro/Tigard/Aloha area. I understand that finding an opportunity that positively cash flows is important, however, there are hardly any opportunities available within my budget. Given my (novice) experience level, I am looking for relatively newer units to avoid running into any maintenance costs that older units may offer. Here are typical numbers that I see, for a 3 Bed 2 Bath SFR that has been built after year 2000.
- List Price: $320,000
- Loan Amount assuming 25% down payment: $243,750
- Expenses as following:
- Vacancy Rate: 8%, $144/month
- Custom Expenses: $50/month
- HOA Fees: $50/month
- Cap Ex: $90/month
- General Maintenance: $90/month
- Mortgage: $1095/month
- Taxes: $240/month
- Insurance: $50/month
Total: $1809/month
- Ren Estimate: $1800/month
Conclusion:
- Monthly Cash Flow: -$9/month
- CoC ROI: -0.14%
Perhaps I am being wishful here to find an opportunity under $325K that offers positive cash flow, but it will be great to hear back from investors who are experienced in this areas.
TIA for any inputs you may have.
They are out there. Where are you looking? MLS? Maybe network with other investors that are rehabbing. Or direct mail to owner occs, or landlords.
Just looking at criteria, I think you're going to be hard pressed to find a SFR 3/2 built after 2000 for $325,000 in the market. The ones you do find will likely have issues that may make using them as rentals less appealing to tenants and yourself.
A couple options:
1. Look at townhouses and condos. For a bunch of reasons I'm not a fan of these as rentals and the HOA fees are likely to bring your monthly payment up anyway.
2. Adjust your criteria-you may start seeing duplexes for under 650k that get you closer to your target numbers.
3. Like Michael said above, try to source your own properties off-mls.
4. Go even further out (Canby, Estacada, Carlton, McMinnville, etc.) although will likely change your rent numbers and future appreciation opportunities as well.
best of luck!
Mathew
-
Broker OR (#201206758)
- Keller Williams Realty Portland Central
@Nitish Paliwal
I am looking at ways to charge higher rent for high demand properties. One thing I am considering is allowing large dogs. When you look across the rental websites almost no properties allow large dogs so there is probably a high demand for properties that will because people love their large dogs and need a place to live.
I think this will be good in a few ways:
1) I can charge a slightly higher base rent just because there aren’t many properties out there that allow larger dogs. High demand, low supply.
2) I can charge a pet rent. This will help cover wear and tear from large dogs.
3) I can get a pet deposit that can be used either for pet damage or if they cause other damage I can use it to cover that.
Risks:
The biggest risk is obviously that the dog will destroy my rental. The house I’m renting needs a good update and is much older. So I’m actually not that worried about damage that I can charge the tenant for because it will actually be an update to the rental. I think I will just do very frequent inspections to make sure that damage doesn’t get out of hand.
Another risk I have heard of is that people have actually been able to sue landlords when a tenant’s dog has bitten them. I think this is absolutely ridiculous, but that’s the legal system for you. I’m not sure if Oregon allows these types of lawsuits, but it’s something I want to look into. At the least I’ll get better insurance because if it.
Maybe look for similar ways to increase rent. You could rent out by the room as well. It’s more work but you make way more money.
Hi @Nitish Paliwal, great advise above! It is difficult to get single family homes to cash flow. You should look into duplexes or renting by the room. With duplexes the bank will use 75% of the rental income to offset your debt to income.
Thank you all, I appreciate you taking time out to post here! So much to learn from your experiences.
Like @Michael Jonesmentioned, I must venture out to look at non-MLS offerings and start building some connections. I looked at couple of Meetups, but Covid is proving it to be tad more difficult.
@Mathew Wray, thanks! I agree, high HOA fees for condos and townhouses are a put-off, hence I was primarily focusing on SFRs only. To your point, apart from tapping into a realtor's network or just reaching out to other investors, is there another 'standalone' way of 'querying' a database to look for off-MLS properties?
@Brandon Harris - excellent suggestion, thanks! I have been considering to allow pets for sure. Given the fact that units are otherwise merely breaking even, this 'd definitely help ameliorate cash flow woes.
@Brad Hammond, will definitely consider duplexes as well. Echoing what you just said, there's clearly a common theme in replies above, 'traditional' methods to find a good SFR 3/2 opportunities is virtually non-existent in these neighborhoods.
So it does boil down to following action items for me.
1) Find methods to search for properties off-MLS, which essentially means, off Zillow/Redfin etc.
2) Network with fellow investors and rehabbers in the area, Covid makes it difficult, so find any online resources/Meetups.
3) See if duplexes make more sense. This may be hard hard for me since I an intending to stay in my primary residence for the time being and financials for down-payment mayn't work out. Otherwise, consider renting by the room.
@Nitish Paliwal
Hi Nitish,
I am in contract to buy a house that will cash flow in pdx.
It’s a 2/1 for $258k.
11615 SW 64th Ave 97219
It should rent for $1495/m
PITI is $1248.63
PM is $120
Maintenance*** - $42
Vacancy** - $75
Cash flow = ~$10
Principal pay down = ~$400 per month
Rent Appreciation ~5% per year or $75/m
Market Appreciation 3% per year ~$8000/y or $659/m
Honestly, if you have a close deal, pull the trigger because all of the benefits if you hold the property 10+ years outweigh the small loss of cash flow over the first couple years. I agree with the others to keep away from condos and HOAs though, getting caught in litigation or a big assessment is a deal killer
***The house is newly remodeled so I’m going to say maintenance will be less than $500/year.
**Vacancy on average in our portfolio is less than 3%, but I will underwrite to 5%