All Forum Posts by: Brandon Harris

@Christopher Bello

It’s primarily to get buy and hold properties for as little money as possible as quickly as possible. Then the tenants pay more of the mortgage, I have less of my personal equity locked into non-cash flowing Portland homes, and I have more properties that will appreciate. It’s definitely a long-term strategy for wealth growth.

I just finished my refi. I did not realize that the 1 year occupancy clause applies to refinances. So I guess I’ll be in this house for another year to wait that out. I’m building my savings and looking for cash flowing properties until then.

I’m thinking about doing a direct mail campaign to a couple areas I’ve been looking at to see if I can get something off market. I think now is probably a good time to start because some landlords are going to need help with trouble properties due to the eviction moratorium and some homeowners will need help if they can’t pay their mortgage.

@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.

Hey Robbie,

Welcome!

Do you plan on working as a real estate agent eventually? 

Vancouver definitely seems like a great place to invest right now. With increased remote working I feel like more people will start looking at Vancouver as an option because they won't have to deal with that rush hour traffic every day, but can buy more for less. Plus, so many of my co-workers are working remotely in Washington for our Portland company and they won't have to pay income tax for any of that time! 

@Brad Hammond

My plans are buy and hold, but I'm not adverse to selling an investment with low return on equity. For now it seems like this has a high return on equity and is worth the risk of holding, even in the Portland Market.

This house is the first step of my long-term plan. I have 2 real estate investment paths that I want to pursue: 1) buy multiple primary residences with low down payments for equity growth and 2) buy cash flowing properties in cheaper markets. 

I want to buy a new primary residence every 1-2 years for the next few years until my kids get older and it's time to settle in one house until they graduate high school. This will be in Portland Metro or in the Corvallis area. These investments are focused on the long-term equity growth through appreciation and mortgage pay down. Plus, I assume they will turn into cash flowing properties eventually with inflation and rent growth. We bought the current house with 3% down. If I can do that with multiple houses then I feel like it is a great opportunity to build a lot of equity without investing a lot up front. I just need to keep a healthy cash reserve from my wages on hand because the properties won't be cash flowing well.

For the cash flowing properties, I want to buy one between buying each primary house. So an initial goal of 1 house a year'ish alternating between primary and rental investment. I am warming up to the idea of long-distance investing, but I feel more comfortable having a property close by that I can check on and do my own property management. I am thinking about the Salem market for that. It seems like property values haven't increased there as much and there is more potential to get a deal. I'm also starting to look at smaller towns around the mid-valley or north along highway 30. Diversifying in 2 states isn't a bad idea either. Especially with the big earthquake coming tomorrow or in 100 years haha.

Why do you think that if I am thinking about selling in 2-3 years that I should sell now? Do you think the market will drop? If we do hate having the property or it turns into a renter caused money pit I'd definitely think about selling here and looking for greener pastures.

@Brad Hammond

thanks Brad.

I fee very good about renting it out and bearing the repair costs as opposed to buying an unknown. We bought the house thinking we would split it into a top/down duplex, but we have moved away from that idea. So renting it was the goal from the beginning.

My big concern is Portland rental laws. Although, I have heard that many of the newer laws don’t apply to landlords with only a few properties.

I’m really just looking for validation that it is a good investment as opposed to selling and reinvesting somewhere else haha.

We are actually at the very end of a Refi. Interest rate will be 2.625% on a 30-year loan. I am getting a few thousand in cash out as well, even though I'm not at 80% LTV. Equity pay down in the first year will be $7,140.

I did the tax calculation and it will increase our taxes even with depreciation. Land makes up too much of the value. We are at a 31% tax rate between state and fed right now. So tax might end up being $1,800/year.

Another side goal I have would be to leverage the equity in this property to buy other investments in the future. So I also see this as a potential "bank" through the use of a HELOC or something similar.

So taking these into account and assuming $0 cash flow to be conservative.

• Principal pay down: $7,140
• Tax increase: $1,800
• Year 1 net return: $5,340 
• $5,340 / $ 30,200 = 17.68% return on capital

Another scenario is hold it for 4 years. Let tenants payoff $7,140+/yr of mortgage and gain appreciation. Then sell for no tax since we would satisfy the 2 out of 5 year rule.

Hello,

My wife and I live in Portland. We are going to be buying a new home in the next few months. We have owned the home we live in for 3.5 years. I'd like to keep it as a rental property. We will either be moving to SW Portland to a better neighborhood or down to Corvallis to be close to family. Corvallis wasn't previously on the table, but with Covid-19 we are considered moving closer to family so that we can have more help with the kids. It would also be nice to get out of the City and they have amazing schools.

Can you provide some feedback on my analysis on whether I should rent our house or sell it? I am pretty heavily leaning towards renting it out, but I'd like some more eyes on it in case I am missing something. 

Facts

Home location: NE Portland, near max line

• Approximate Market Value: $380,000
• Loan Balance: $325,000
• 4 bed, 2 bath
• 7,500 sq. ft. lot
• The roof will need to be replaced in a couple years. Garage door needs to be replaced.
• Most appliances are newer. Washer and dryer would need to be replaced for renters.

Monthly Costs:

• P&I: $1,305
• Property Tax: $294
• Insurance: $70
• Mortgage Insurance: $63
• Garbage: $40
• Total monthly payment when rented:  $1,772

Monthly Rent:

1. Range $2,200-$2,400 * 5% Vacancy = $2,090 - $2,280

Cash Flow before repairs, capex, and taxes:

• Monthly: $318-$508
• Annually: $3,816 - $6,096

Cash flow after repair and capex, before taxes:

Assume a reserve of 10% of rent for capex and repairs: $240

Monthly: $78 - $268

Annually: $936 - $3,216

Other Factors:

We would probably spend a couple thousand dollars less getting the house ready to sell vs. rent. There are some appliances that need to be replaced and we need a new garage door. If we sell, I probably wouldn't replace them unless the RE agent thought it would add more value than it cost.

I would also self-manage. I'm an accountant and I like learning about rules, systems, and all that boring stuff that other people don't like, so I'm not worried about learning the complex housing rules.

If we stay in Portland, I might also rent by the room. This would increase the total rent we could by a few hundred a month, but it would be more work.

Pet rent could be anywhere from $35-$100/mo. I am debating allowing larger dogs for a high pet rent. Large dogs aren't allowed very often as far as I can tell so I think there could be high demand for it.

My analysis:

We sell home for $380,000. Subtract out our outstanding loan balance for $325,000, commission of $22,800, and $2,000(?) of additional costs during the process. We end up with $30,200 (380,000 - 325,000 - 22,800 - 2,000).

Cash on Cash Return: 

• Low-end: 3.1% (936 / 30,200)
• High-end: 10.6% (3,216 / 30,200)

ROI:

• Year 1 - Principal: $7,140
• Year 1 - Interest: $8,445
• Low-end: 26.7% ((936 + 7,140)/30,200)

High-end: 34.3% ((3,216 + 7,140)/30,200)

Also, the mortgage would be paid down by $7,140 in the first year and more each year after.

What are your thoughts on this? What if I had to add in a property manager? Would it still be worth it?

Thanks for any feedback you can provide!

Thanks for organizing this. I'm looking forward to meeting others in the area!

@Greg H. I'm a new investor on the West Coast and I have been amazed when I learn about markets around the country. In most metropolitan areas in Oregon, $50k won't get you a decent size lot. Then when I look around the country, I see houses on 7,000+ sq. ft. lots going for less than $50k! They are definitely 2 different worlds for investment!

Now I am looking at investing in out of state properties because Oregon is very expensive to get into compared to other areas.