All Forum Posts by: Brandon Harris

For rates, I have had a lot of luck with credit unions. They seem to have really good rates, even for investment properties. OnPoint Community Credit Union is one of my favorite.

When it comes to getting cash out of the property, before she does anything she should make a goal for what she would do with any extra cash. There is no point in it sitting in her account while she pays interest on it and inflation eats it away.

Your plan to refi is doable. What she/you need to do is run the numbers on different refi options to see how it will work as a rental. $1,950 is likely a low rent for that house in the Portland area.

If she is interested in selling, she should remember to factor in all the costs related to that. 5%-6% realtor commission will knock the proceeds down to $470-$475k, plus other selling costs. Depending on when she inherited it there could also be some taxes on the sale. I would talk to a CPA about that. If her brother is interested, he could carry the loan instead of her refinancing. Or she could refinance to get a sizable sum out for him as a down payment and then write a note to him for the rest. 

There are a lot of options. I think it centers mostly around her investment goals. Maybe you offer to manage it all for her for a fee if she doesn't want to be involved. Win-win!

@Chris Shepard Thanks Chris. I appreciate the information from someone who owns and manages properties. I've been running around my house with my tape measurer checking everything, so this gives me some peace of mind!

Hello,

I'm looking for a resource to learn about the Portland landlord laws for small scale landlords. I have heard that there are some lawyers who will charge a flat fee of $250, meet with you to explain the rental rules, and provide some hard copy resources. We also have a specific question about 1 part of our house that isn't quite up to code, but we aren't sure if it is a big deal or if we need to dish out some cash to fix it. I know that most items are grandfathered in if you live somewhere, but once you rent it out then the property is held to higher standards. 

I'm wondering if we didn't fix the code issue would umbrella insurance cover it or do they typically deny those types of claims because the item isn't up to code. The issue isn't like live wires sticking out of a wall. It's more like ceiling height is too low and someone bumps their head kind of thing.

Does anyone know any lawyers who do this kind of thing? Or are there any other resources that people know of? I want to make sure I understand the rental laws in Portland, but I also don't want to spend the time combing through the City code so I'll pay a bit to get the knowledge from someone.

Thanks!

Originally posted by @Cody L.:

Originally posted by @Jeff S.:

@Steve Morris and @Brandon Harris not much sympathy for landlords these days. 

"I think you could win against this, but considering the logic of our courts, you need to make it pretty simple on how it hurts the poor."

I see this hurting the poor. Many are keeping places vacant which drives up rents. Lots of mom and pops are subsidizing the poor (older less debt low purchase price) who are selling to new owners who occupy or rehab and raise rents.

Tons of laws to protect the poor hurt the poor.  For example, we used to offer somewhat reasoanble deposit amounts to move in.  And were sort of lax with rental history and credit because we undersatnd everyone has sh*t that's happened and may need a second chance.

We'll take the risk because, well, if we're wrong and they crap on their second chance then we'll evict them.

BUT...  If the government is going to say "you're not allowed to evict people", then how the hell can a landlord allow someone that's 'iffy' to lease?  Unless they put up a HUGE deposit.  So we've been turning away people left and right.

So yeah, this might help people IN housing, but it's hurting people LOOKING for housing.  Likewise, there were upgrades that didn't make sense because the resulting rent increases were not enough to justify them.  But we're doing them now.  Why?  Well the rent increase still isn't justified by what we have to spend, but getting a tenant that we won't have to evict is.   So this is decreasing the options for lower income people as no one wants to rent to them and take the risk.

But the politicians that grandstand and say "We want to keep people in their homes" (by stealing private property and forcing them to house people on their dime) end up looking good (at least to low information voters, which is who supports most of the people that make those statements)

I like that you give people a chance. That's great to hear. Though I'm sad to hear you are less able to as these rules come into place.

I've played with the idea of different deposit schedules for different tenants. For instance, maybe half the deposit at move in and the remaining amount over the first 6 months. This would help folks who may not have all of the funds but show that they can pay (someone laid off but now has a good job) or are coming out of a tough living situation.

Or if there is significant damage during an inspection, then the deposit increases and maybe an extra $100 has to be paid each month until you get to a higher deposit balance. Past behavior is indicative or future behavior so why can't that be taken into account. You don't want to evict someone because they made a mistake and send their life into a spiral. At the same time, you need to cover yourself in case the behavior occurs again.

Unfortunately, you can't treat anyone differently and there is a rigid system for deposits so there is no flexibility. I understand it is intended to protect people from being taken advantage of, and probably does to an extent, but it hurts others.

Originally posted by @Jeff S.:

@Brandon Harris there have been many meetings. It has been in the news and many of us have sat in these meetings pleading our cases to no avail. 

I think that with Chloe gone the CoP will be at least more receptive to landlords. What were the discussions like in those meetings? Was the message from landlords that they didn't want this or did they try to tweak it to make it more functional? 

As for public hearings, sadly they aren't much more than a formality. Generally, if it gets that far the Councilors have already decided whether they will vote yes or no and there are enough votes to pass. All the details and concerns have been flushed out in work sessions and private meetings. It would be nice if the public hearings actually carried weight anymore.

Portland is definitely a long term equity play like the rest of the West Coast. 

Detroit is a completely different story. What is it that Mindy says about location? "You can take the crap out of the house, but you can't take the house out of the crap" or something along those lines. Portland is in the middle of natural wonders that attract people from around the World. Just that alone brings so much value to our area. Detroit is in the midwest and the only appeal is the lake. Brutal summers and horrible winters. No thanks.

In terms of property values, if the Portland market drops, what do you think the rest of the people on the West Coast will do? They will buy here because everywhere else is so expensive. What do you see in the midwest? More cheap houses. So people wouldn't flock to Detroit for cheap house, because they already had them.

Urban growth boundary is the real key. It limits inventory and urban sprawl. Limited inventory will keep prices high.

I think we will see stagnation in the next few years, but that stagnation will be relative so really a slower growth rate instead of the crazy growth rates. Then if we solve or improve our major problems of 1) bad PR from protests and 2) homeless crisis then we will start taking off again. I think the CoP issues are real and will probably more likely just drive rents higher because of increased operating costs. This will make rentals less appealing in Portland, but still an equity play. 

Even if you break even on cash flow your first few years (counting R&M), your tenant is still paying off mortgage and even small appreciation is good appreciation on high dollar properties. If you had a 400,000 property with 20% down and 2% appreciation and break even cash flow, in the first year you are seeing $5,600 of principal pay down and $8,000 of appreciation for a total of $13,600 illiquid gains. Assuming you paid around $85,000 (dp + closing) that is a 16% ROI not counting tax effects.

@Steve Morris @Jeff S.

I think the key for a court challenge is not to challenge the new law in total, but to challenge parts that are not economically feasible. If landlords can assert that tracking every little fixture in every property is overly burdensome, they may be able to get relief by changing the rules. 

I think in this environment that full blown challenges are bad ideas. The world is going too crazy. Damage control is the play right now. Either in trying to influence the process before the law is in place or suits to amend the law. I don't know this for certain but I would assume Chloe Eudaly didn't engage with landlords to get their input when crafting this. I think the current City Council members may be more engaging with all sides to get an outcome that works better for all parties.

Originally posted by @Jeff S.:

@Steve Morris and @Brandon Harris not much sympathy for landlords these days. 

"I think you could win against this, but considering the logic of our courts, you need to make it pretty simple on how it hurts the poor."

I see this hurting the poor. Many are keeping places vacant which drives up rents. Lots of mom and pops are subsidizing the poor (older less debt low purchase price) who are selling to new owners who occupy or rehab and raise rents.

I also agree with you on this. Now instead of a 5-10% reserve for repairs and maintenance, investors will need to factor in 10-20%. The few tenants who trash a place will cost the rest of the tenants in increased rents.

I think we'll see the effect of this increase in rent first in larger property portfolios rather than mom and pops. The adverse side for mom and pops is that this could kick them out of the rental business if they have a huge loss that can't be recovered from deposits. Or they try to recover it from deposits and do the paperwork wrong, then have to pay back double the deposit.

I didn't see this referenced anywhere, but does this apply to all landlords or only those with more than 4 units?

@Steve Morris Thanks for the background and the pdfs. 

Whoa, death by recordkeeping. You have to identify every depreciable item and state the depreciation in the RENTAL AGREEMENT. This will require a lot of extra work. Small fixtures are included so it's going to be a long list. Luckily the lives they provide are somewhat long so there would still be some value.

Someone needs to take the City to court because it is honestly too cumbersome to ask businesses to go through this process. They need to have a minimum value threshold that this applies to. 

It is still definitely worth collecting the security deposit to cover significant damage and deter damage. I think anything beyond that will require a cost-benefit analysis as to what you'd like to pursue. How much time do you want to spend pursuing $50 for a damaged faucet? 

They do allow estimates and justification for non-depreciated replacement costs. 

One question is whether they want us to capitalize installation costs in addition to the cost of the item or if they will let us exclude those. A landlord may be able to argue that, even if the property is fully depreciated, labor costs can be withheld. Even if the item itself has no value, there is a cost to replace it. Then even if an item is technically fully depreciated, you can withhold deposit funds to pay for the labor to replace it. We'll have to see about that though.

https://www.portland.gov/sites...

The sad thing is that the listing of assets and their value shows which items tenants can destroy without any, or very little, repercussion. There could be people who use this information maliciously and others that are just bad at taking care of their household that will subconsciously use the knowledge to care even less about something in the unit.

Is this a new law that is coming up or is it a new tactic that courts are allowing?