Contractor · Portland OR · Member since 2021 · 39 posts · 24 votes
I have been looking at small (1-4 unit) multifamily deals in Portland Oregon for the last year or so. When doing do diligence I have frequently been running into expense and income reports that show large sections of non-payment, I assume due to COVID. However, it seems that few people if anybody is factoring in the increased non-payments into their pricing as they would if their vacancy rates crept up. I see the non payment as worse than a vacancy since you still have obligations as the landlord. Most sellers, brokers, and agents keep talking about valuations without acknowledging the lack of revenue/rents on the paper they handed over. How is everybody else dealing with this when it comes to deal-making and valuation?
Hey @Roarke Van Brunt, that is a stout observation. In my opinion, investors are not factoring that in because the eviction moratorium is a short-term problem (fingers crossed). It should only last a few months and not enough to affect the price of the property. I think there is a valid point if you were to offer less for a 2-4 unit because one of the tenants wasn't paying.
It still seems like people would factor this in more at this point. Pandora's box is open so to speak, so if you are going to own a rental property long term it seems like you would want to factor this into your vacancy rate?
For example if I owned a unit for 30 years that's only 360 months, so a vacancy rate pre rent moratoriums of 5% would give me 18 missed months in 30 years. But what I have been seeing was 6-9 months of non-revenue periods just in the pandemic period. So over a 30 year period going forward I kind of assume that some new pandemic will hit us, and the government would use the same tools. If you are going to miss and extra 6-9 months from a pandemic every 30 years shouldn't you factor in an extra 2.5%ish to your vacancy/non payment rate? I guess my question is does everybody think this is a new normal, or are we truly going back to business as usual?