Toms River, NJ · Member since 2016 · 21 posts · 11 votes
We are currently considering a rental property in Bend, Oregon, but the current rent is far too low. It is a duplex with a list price of $332,000. Current rent is $800 per unit. It's in a great neighborhood, in good condition, and the area has an extremely low vacancy rate (less than 1%). All the research I have done (including Rentometer, Zilpy, talking to my realtor, and contacting a property manager in the area about it) has put the fair market value at $1200 per unit or more (so total income of $2400).
As a new investor, I'm just curious what other people's experiences have been in situations like this. If I base my calculations off an income of $2400 and make a low offer, the numbers make sense to me. But, if I use $1600 total, the numbers don't make sense at all.
Whatever your offer is make sure that you price in tenant turnover, no tenant that is currently paying $800 is going to be happy about paying $1200. You will likely have to turnover both units. Also, if these tenants have a lease you need to factor in the time-frame remaining until you can even consider raising the rents.
In a recent purchase of mine the below market rents were a result of a checked-out landlord. In that case, there was also considerable deferred maintenance that had to be remedied, watch out for this in your property inspection.
Finally, check to make sure the rents are not low because of a rent control law or some other restriction.
Hi Nicole,
I live in NJ as well. I started investing last year and now have 7 units. 1 is a single family, and 2 are 3-families. For buy and holds, I like to buy in urban neighborhoods typically because the numbers make more sense (as long as you find good tenants). For instance I bought a single family - 4 bedroom in east orange for 35k at auction (sight unseen) lucked out and only had to put about 7500 into it and it rents for $1500/month. After expenses it cash flows about 800/month.
One three familiy we got for 45k, this one is a full gut - at least 100k rehab but we are expecting similar returns.
The last three family we are still waiting to close on and still haven't seen it.
To me it just doesn't make sense to spend 300k with those numbers. It'll take 20 years to pay off. I would look for better deals out there. They're definitely out there.
Whatever your offer is make sure that you price in tenant turnover, no tenant that is currently paying $800 is going to be happy about paying $1200. You will likely have to turnover both units. Also, if these tenants have a lease you need to factor in the time-frame remaining until you can even consider raising the rents.
In a recent purchase of mine the below market rents were a result of a checked-out landlord. In that case, there was also considerable deferred maintenance that had to be remedied, watch out for this in your property inspection.
Finally, check to make sure the rents are not low because of a rent control law or some other restriction.
Thank you both for your input. I agree that we would both have to find new tenants for both units - $800 to $1200 is a huge leap. Great point about how the landlord could be checked out and we could have some extra maintenance to deal with.
$300k is a lot for the rent, based on other markets I am looking at. But, we are looking at buying there because we may want to move to Central Oregon someday and it would allow us to live in one unit while we rented out the other. Also, property taxes in Oregon are SO much lower than those in NJ - a home that would be $6,000 in property taxes in NJ could be $2,000 in Oregon. Lastly, we think this area of Oregon is exploding and still has a ways to go before it levels out... so, to some extent, we are banking on appreciation.
I don't think I would invest in Bend if I were you. I am a little outside Bend and it is tough to cashflow there. It could appreciate big time but don't buy it for cashflow. What part of Bend are you looking in? For appreciation you want to be where the college is going on Westside. That could be YUGE! (Isn't that what they say in Jersey.)
@Eric Bilderback - Thank you for the feedback on Bend! I analyze basically everything within our price range on the MLS for Bend and Redmond, and cash flow is really not great. We've thought about making some very low-ball offers that would give us minimal cashflow if they were to be accepted, but it's a hard choice, because cash flow is so much higher elsewhere. Finding a place by the college is definitely a possibility, simply for the appreciation aspect. And, we were also hoping that rent would end up going up there once the college is up and running, because there will be thousands of more people needing a home in that part of town. What do you think?
And, @Mike Hanneman, I've started looking into the midwest and Philadelphia as well. So many options!
Yes I agree, rent will go up. But you should buy on the westside of Bend. Specifically where the college kids are going to be. I spoke with a big time Bend real estate investor 2 weeks ago. He told me the studies his firm showed that prices would double where the college is going. I think it is entirely possible. My thinking/advice for people going into Bend that are not investing for cashflow is don't hedge your bet and invest on the Eastside. Double down rents will almost certainly increase and prices will appreciate big time around the new college! I also think Redmond is excellent more cashflow and maybe even more appreciation. My little town of Sisters has historically been more expensive the Bend but since there have been so many out of state investors in Bend, Bend has been more expensive over the last three years. That tells me Sisters is going up as well.
For someone who is speculating on an area and not investing for cashflow the westside of Bend is the best place I am aware of.
Please keep me updated would love to see what you end up doing or better yet if you come out this way let me know we can get one of our overpriced yet delicious Oregon beers!
Nicole Cotrino I do not see how those numbers make any sense. You yourself said it will be little cash flow. So what happens when you have large expenses you will be feeding your investment. You could make the same return purchasing in another city at a lower price. What is your goal is it to have income then buy based on numbers not potential appreciation. If what you want is to have a property produce income for you that property does not need to be located in the city where you would like to move one day it could be anywhere.
An investment needs to feed you not you feed the investment.