All Forum Posts by: Mike Nuss

@Paige Kelsey Grant's podcast was a great one for sure. His take on buying newer high vacancy buildings in low cap markets (ie Seattle), and holding on in the interim, is a great strategy in my opinion. The current excess of new supply will get soaked up over the next 24-36 months and we will eventually get back to an undersupplied market. I personally love buying in low cap markets as efforts are rewarded more than in higher cap markets. For example 4K of NOI in a 4cap is twice the reward as 4K NOI in an 8 cap market.

One thing I learned during my time as an appraiser, is that understanding market segments is key to seeing the bigger picture. Longview is a market in and of itself....completely different from Vancouver, which is different from inner Portland, which is drastically different than east county. It amazed me that you said cap rates in Longview are around 6.8. That's a huge "sell indicator" in my opinion as I believe that market should be in the high single digits at minimum, given the low owner occupancy rates and distance from true metro areas (although it's close to Vancouver, I think Camas, Ridgefield and Battleground will feel Vancouver's growth before Longview does). 

Thanks for the post vote, I'm glad you took my constructive criticism as a positive.

Good morning @Paige Kelsey....here are my thoughts. I hope they're helpful. Please consider this an opinion/constructive criticism at best. 

1) The financing numbers are pretty unrealistic from what I've dealt with the past two years in commercial loans. 0 points, 75% ltv and 5.5% interest with 30 year am won't happen. The interest may be realistic, but you'll be looking at a 25 year am with 10 year balloon at best. The DCR overlays will probably bring your ltv closer to the 65% ltv range and you're going to be paying atleast 1 point at closing and 4-5K on the appraisal, so expect closing costs to be much higher.

2) Investors bringing 1mm+ to the table won't settle for a 10% ROI at exit strategy. The ROI, including exit, needs to be more like 20% year over year, in order to attract that type of capital.

3) Never ever invest in real estate that results in a negative return after a year 1 cash out. 

4) 100K in repairs is less than 2K per unit....I don't know the Longview labor market at all, but I assume you're not doing much with that type of budget. 

5) $50/unit rent increase is nice on 64 units, it does result to a significant amount of gross $  "equity", based on a 7.6 cap rate. However, that results to less than 1% increase in value. Reposition purchases should be increasing value by a minimum of 30%....although this doesn't sound like a value add/reposition deal. 

In my opinion, the price needs to be dropped over 500K (maybe more like 1mm) in order for this to be an attractive investment and not considered pure speculation.....and I don't think Longview is a good speculation market. It can be a cash flow market, but speculation is better suited for metro areas like Portland that have a history of consistent appreciation. 

Again, please take this as constructive criticism. I really dislike negative attitudes and posts. I've read some of your past posts.  You bring a great attitude and good knowledge to the table. I just thought I would chime in on this one in hopes that the above points bring some more perspective to your analysis on these types of properties. 

@Eric Oblepias welcome to BP. Your goals are very realistic. The BRRRR model works very very well in Portland. It's very cash intensive, due to pricing in our area. However, creating enough equity to recapitalize your investment is a viable strategy in Portland. There won't be much cash flow at the end, but you'll have a significant amount of equity once the refinance is done. That is the #1 wealth building model I, and other Portland locals use.

I don't like to self promote at all, but I'm going to in this case (search key word RareBird and I'm sure you'll see some recommendations for our networking meetings here on BP) as our speakers in August are soon to be retired engineers. Blake and Jessica (for some reason my tagging isn't working) are part of our brokerage/investment team, they're both young engineers and they just liquidated their Portland (wealth building) portfolio to purchase cash flow properties in Alabama. They're retiring at a very enviable age.

You should also connect with  @Bob B. he's a recently retired engineer, focusing on personal investments and helping others do the same. I have a feeling you'll get along well, engineers typically do :)

I hope this helps!

@Jon E. give Phil Bailey a call. He's at Legacy Real Estate down there in Salem. 

Check out this video we made for our Portland, OR event!

https://vimeo.com/273980434/3cc49c3203

@Jay Hinrichs I whole heartedly agree. I know Portland like the back of my hand, so I'm here for the long term. Plus, if/when rent control becomes real here......I'll make a million $ on paper over night almost. The best part is communicating with tenant advocates. I state from the get go, that it's in my best interest "wealth wise" to have rent control, but here's why I think it's bad for tenants and the market as a whole. They just do not know how to wrap their brain around that comment. Their belief is that rent control is the magic unicorn that deflates the market everywhere. We both know that's not the case. 

@Jeffrey Lee take a look at the latest tenant protections ordinance. 

https://www.portlandoregon.gov/citycode/28481#cid_...

Specifically you'll want to look at the new exemptions effective this spring. The one unit exemption has been removed, which is what I believe you're referring to in your original post. 

On . positive note, it sounds like you are exempt via item #5.

5. a Landlord that temporarily rents out the Landlord's principal residence during the Landlord's absence of not more than 3 years;

@James Dishongh one of our brokers attended his CE class yesterday and we recorded a podcast with him yesterday. I do not doubt he's in the national top 1% for knowledge on this topic. We are blessed to have him here in Portland. And he's pretty dang cool to boot. 

@Alex Wade welcome to BP. If you're not convinced Portland is a good place for rentals....probably won't be convinced. @Jay Hinrichs (thanks for the RareBird Investor Network shout out by the way) is right, new laws are coming out left and right. I'm seeing property managers struggle to keep up, let alone private individuals. I'm on the rental services commission and I'm frequently going back to review new legislation to ensure we're doing things correctly. Come check out our Thursday night meeting next week if you have any interest of networking in person or interest on Portland's market. 

@Elliott Gansner I second @Tony Ngo about faster permits. If you're just needing help with the application process, they're the group to go to. We have multiple projects with them right now.

Also, @danni is right on about @shawn morgan. He's our go to attorney in this field. 

I'm happy to chime in on some property specific stuff too if you would like. Feel free to dm me. 

Thanks!