All Forum Posts by: Account Closed

Thank you, everyone, for your knowledgeable input.  :)

Hi Aimee!  Congratulations!!  

I had a similar situation recently.  We offered asking and got under contract.  After the inspection, we itemized our expenses and presented them to the seller with our lower offer.  Whatever you do, you'll want to make sure that the numbers work without fudging them.  For me, it was tempting to say, "we can do the kitchen rehab for X, even though such and such says it will cost Y."  

Be conservative (i.e. avoid underestimating and if anything, anticipate higher costs) and present the numbers to the seller with your revised offer, explaining why your offer is that specific amount.  You might consider adding a line saying, "buyer's contribution to repair costs" if you want to have some goodwill with the seller, so that the repair costs aren't ALL s subtracted from your original offer.  

Here's how I did it:  https://www.biggerpockets.com/forums/223/topics/27...

Regarding Section 8, you may want call HomeForward and ask them about all the details about what it takes to remove a tenant, what the maximum rent can be, etc. I think for a 2-bedroom in Portland, HUD's "fair market value" is $1207/month in 2016.  I've found that the hotter the neighborhood, the worse Section 8 is from a profit perspective, because you can't increase the rent more than whatever HomeForward allows.  I did not have a great experience having a Section 8 tenant in North Portland.  I tried to increase the rent and they only let me increase it $18.  

If the tenant is disabled and has been there a certain amount of time, it may be more difficult to remove them.  Ask HomeForward about how to raise the rent, what kind of notice you need, how to remove tenants, whether you can do a no-cause eviction, and whether the rules are different for disabled or elderly tenants.  

Welcome, @Amanda Coleman!  You threw out a lot of good options, and as Rob said, there are others you'll discover along the way.  

Regarding ADUs, remember it's going to cost the same to build on land you already own--whether you're in a close-in SE neighborhood or in far East Portland--but the rents you'll get close-in will be higher.  The property tax issue is real, however, no matter where you are in Multnomah County: http://www.portlandoregon.gov/bds/36676 

What you do of course will depend on your near- and long-term goals, available resources, and tolerance for risk.  One suggestion I'll make, however, is not to let emotions guide your decisions, especially when you're living in a unit that will eventually become a rental or a flip--unless you make the decision consciously and are willing to, for example, spend an extra $1000 to tile an apartment bathtub surround because you really want to have tile while you live there, knowing that you won't recoup your investment as a rental.  Not that I speak from experience, ahem, or anything.  ;-) 

The calculators here on BP are a good place to start, but you can also use spreadsheets (made by yourself or downloaded for free in the file section or elsewhere online) to analyze purchases or flips or conversions, and then make the best decision based on the numbers, and as they relate to your situation.  

Hope to meet you at the Portland meetup!  

Thanks @Neal Collins--I've owned a duplex in Portland since 2012 and have studied the zoning code and have never seen that regulation.  Did someone tell you that?  I've also heard from contractors and designers that sometimes you will get two different answers from two different people in the planning bureau, and if you don't like the answer you get from one person, just go back another time when someone else is at the desk.  

In any case, here's what I found in the zoning code:  

and 

So if, for example, there is a 4-plex on a lot zoned big enough for 5 full units, and I add an ADU, I would still be able to add a regular unit on top of that, if I wanted. If I don't, and just keep it as a 4-plex + ADU, then the city would still consider it a 4-plex, because according to code, it could become a 5-plex in the future.

I think.  

Thanks @David C.for your input and in theory, I tend to agree with you.  But in practice, I didn't want to kick out these two families.  Maybe it's not the best business decision, but I'm in it for the long haul, and they won't be there forever.  

Regarding the bathroom moisture, I did replace their nonfunctional bath fan and the next time I visited, I noticed a drastic difference in both the condensation and the smell.  

Also replaced their cracked bathroom vanity and decomposing medicine cabinet, and the tenant seems to be much happier.  I think it helps that she sees I'm not a deadbeat like the previous landlord.  

This question may be specific to places like Portland where the city encourages density by allowing accessory dwelling units (ADUs) to be added to properties in residential zones.

If I purchase a 4-plex (zoned residential R2 in Portland) and rehab it to include an ADU, can I still finance with a residential mortgage? Because the permitting process is different to add an ADU vs a bonafide extra unit, and because SFRs with ADUs in Portland are still classified as SFRs, my hunch is that an ADU could be added to a 4-plex yet the property would still qualify as residential for lending purposes.

Anyone have any concrete knowledge about that? @Charlie Fitzgerald, do you know?

Count me in!  Thanks for taking the initiative on this, @Robert Laird!

Welcome to the forums @Gabe K. and congrats on your mini retirement!  That sounds like a fantastic trip!  

 To eliminate capital gains, then as long as the sale price isn't more than $285k (250+35), as far as I know, that would do the trick.  

The whole thing seems risky though, because what happens if they become tenants and they don't pay rent?  You'd need to sort out all of that in advance and make your lease really explicit about the arrangement, because it seems like they could be easily taken advantage of if they don't completely understand the setup.  

Would you be able to rent the house to them at market rate, no matter how high market rents become over the next 20 years?  (Because she could live another 20, you never know.)  And if not, would you be OK with that?  What if you need to sell the property while she's still alive?  What if the market softens?  

If you can buy the house at a low enough price that you don't mind sitting on it for years and years while it doesn't earn you market rent, and as long as they know all the implications of essentially renting what was their own house (e.g. the rug could be pulled out at any time), then maybe you could make it work.  There are so many variables.   But for them to sell their house if they still want to live in it doesn't seem like the best solution for them.  They could do a reverse mortgage and have more housing security than selling it on contract to you.  

I'm no expert on creative finance though so maybe other people have better suggestions.  

@Steve Moody's goals may or may not be the same as yours @Daniel Chang. Obviously you want to cash flow, so you'll run the numbers for whatever you choose, but your picture makes you look young and based on what you said, it sounds like you're making a decent W2 income. Your goal may be to hold onto property for a 27 years while tenants pay the mortgage and you get tax benefits, not necessarily to replace your income. I don't factor appreciation into my calculations but Portland is an appreciating market, and I personally think it's fair to invest here based on that. 

Everyone has their own strategy and reasons behind it, but it's important to not get paralyzed by over analysis. Yeah, you probably won't cash flow if you buy a brand new neo-craftsman near Alberta Arts for $800k, but a modest 2009 skinny house in Clackamas? It's possible. You don't have to hunt down the best deal ever, you just need to start. 

Good luck--but I have a sense you don't need it as you'll be fine. :)