How to buy in sellers market?

Question

I am looking for advice on buying a property in the hot Portland market. I am selling my home and will pocket 70-90K. After paying off all my debts I will have approximately 40-50k. I was at first thinking of renting until the market settles down but rent is looking to be around $1200-1400 minimum. I don't really want to buy a house either since there is hardly anything available and because this bubble has to pop some time soon and I don't want to lose on the purchase. I am now leaning toward purchasing a lesser expensive townhouse, something around that 1200$/ month range to live in for a year, save some money then hopefully the market turns and I can keep it as a rental and buy a second home. Not sure if I should buy or just rent, is this bubble going to pop soon???

Chris Parrish · Answer

Hey Josh,

I am a realtor and investor in the Portland area and have found that there are still a few homes out there that make sense to purchase as an investor with the buy and hold strategy. I would have to agree with Sue K. that you always want to purchase your home as if you were never going to sell it. Meaning that you only purchase a property if you can always rent it for more than your operating costs. That means that the mortgage, the maintenance costs, vacancy factors, and the management costs still predict to be less than you can rent it for. A book I would recommend on this strategy is, "The Weekend Millionaire Real Estate Investor." There is great wisdom in this book and I found it very helpful to me. His strategy is excellent and he articulates it better than any other book on the topic that I have read.

I just purchased a single family home in the Gresham/Fairview area that should rent for about $1400 a month and our mortgage is $900 a month with a 20% down payment. So although its super competitive here, deals are still out there!

I too have stayed away from condos and townhouses, however, I have a few friends who have done very well with them.

Steve Moody · Answer

I don't see Portland as a bubble really. Sure, there might be some flattening or slight correction here and there, but over the long haul if you buy right you'll be ok. The trouble comes when you're upside down in you and suddenly need to sell (or refi). If you have a conventional 30 year loan you know how much your mortgage will me next month and in 20 years. Rents might level off but unless there's some catastrophic event, people aren't going to be leaving so rents that pay the mortgage today will continue to pay.

One thing that I think a lot of people are doing now that might get them into trouble is buying negative cash flowing property in the thought that rents will rise enough to eventually pay off, and the property will gain value enough to sell for a big profit. It's a gamble IMO and goes against the notion that you should make your money in real estate when you buy.

Mike Hanneman · Answer

I love it when the saying "this bubble has to pop" comes out. How long did the last real estate bubble last? As long as you buy smart you can and will make money even if the "bubble" pops.

Account Closed · Answer

Let me look into my crystal ball...

Actually, I think whenever you buy something, the numbers have to work for you today.  You never know what will happen.  I had a mentor once tell me that you want to buy in an area no farther than 2 hours from a metropolis.  You can expect things to grow out that far eventually, as far as people who will eventually be commuting to the growing edges of that major city/area.

But, I don't expect the rental market to decrease in that area.  So, having a rental there would probably always do well.

I personally hate HOAs though.  Too many future unknowns with them.

By the way, I lived in WA for 18 years, although I am from CA and moved back to CA.  I had property in WA north of White Salmon.  So, I have a clue as to the area.  And it's done nothing but boom and grow.

Josh Widener · Answer

Thanks everyone for all the help and input. I would love to go the duplex route, the only issue might be finding one between the time I sell and the time I need to vacate the house but I'll definitely be looking for one. I'm also reconsidering the townhouse unless I can find one with a very low HOA dues. I am more optimistic now and am excited to get started looking for an investment. Thanks again

Randy Johnston · Answer

@Josh Widener, Welcome to BP and congratulations on selling your home for a profit.

You may want to consider purchasing a multi-family (2-4 units) property since you can live in one unit and rent the other units to cover your mortgage to some extent, either fully or a good portion. At some point down the road, you will be able to purchase a SFR and you'll still have your multi-family property paying for itself and more likely bringing in some sort of cash flow.

There are still good deals out there, you just have to be patient.

Good luck.

How to buy in sellers market?

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