Investors leaving Oregon... Where are you headed?

[Celia Moore]

Oregon recently became the first state in the nation to enact statewide rent control and restrictions on tenant evictions. Senate Bill 608 was signed into law by Gov. Kate Brown on February 28, 2019, taking effect immediately.

Senate Bill 608 sets the maximum that a landlord may increase a tenant’s rent at 7% plus consumer price index (CPI) during a 12-month period. This unprecedented statewide cap applies to month-to-month and fixed-term tenancies, with exceptions for new construction and regulated affordable housing. At the beginning of a new tenancy a landlord may re-set to market rent.

In addition to restrictions on a landlord’s ability to increase rent, Senate Bill 608 restricts a Landlord’s ability to terminate both month-to-month and fixed-term tenancies. After the first 12 months of occupancy a landlord may only terminate a month-to-month tenancy for cause, either tenant-based or landlord-based. If terminating a tenancy for a landlord-based cause, the landlord must give a tenant 90 days’ notice and provide relocation assistance in the amount equal to one month’s rent. Landlords with four or fewer units are exempt from paying relocation expenses. SB 608 further provides that a fixed term tenancy automatically converts to a month-to-month tenancy if not renewed or terminated.

Supporters of the bill argue the new restrictions will provide relief to tenants facing rising rents and limit displacement from landlord evictions in what has been declared a statewide “housing crisis.” However, research on rent control has shown that where legislation works against market forces by setting a cap on what a landlord may charge the impacted communities tend to see stagnation in the market. Where rent control has been enacted, tenants are encouraged to stay in their unit even if their housing needs have changed in an effort to secure their below market rates and markets have seen a reduction in the availability of rental units.

The government’s efforts to preserve housing affordability distort the economic incentives that are otherwise present in the rental market. Landlords are disincentivized from maintenance and repairs that may otherwise be a priority. Individual ownership of rental properties may decrease due to added costs associated with the restrictive parameters of the new law. In the aftermath of SB 608 Oregon could see property owners moving their investments to alternative markets as the benefits of owning property in state are now outweighed by the drawbacks.

Investors: What is your new game plan?

[Patrick Daniel]

Originally posted by @Alex Olson:

Originally posted by @Celia Moore:

@Patrick Daniel sounds like a good option to me! Thank you, hopefully we can pull it together over here, but only time will tell. 

I have a lot of Oregon clients buying property here in Kansas City. Cash Flows well with good appreciation.

I keep hearing about KC being a market on the rise. I have a couple buddies who have walked some units there though and had some horror stories as well. Are you seeing mostly SFR or small (5-16 unit) multifamily as well?

[Celia Moore]

@Bob Prisco Thanks for the tip! 

[Celia Moore]

@Alyssa Dyer I am hearing that name come up more and more! Thanks for the observation. 

[Alex Olson]

@Patrick Daniel I work with clients exclussively on 8+ units. No horror stories yet but no deal is perfect. Just buy it right with good management and you will do great. 

[Celia Moore]

@Bryan Blankenship thank you for the info! San Jose will definitely be somewhere to consider. Now the real question, what's the best way to find the right person/company to work with... 

[Bryan Blankenship]

@Celia Moore Ah, that is one of the most difficult parts, yes! Of course, you can ask for recommendations here, or you can try Google, etc. It all really comes down to figuring out what your long-term plan is, and then talk to some providers to see if any of them are a great fit. You can do a few basic litmus tests up front, like seeing how long they've been in business, taking a look at their properties and the area they operate from - then schedule a phone call with them (have a prepared list of questions if you can manage it).

Some providers have been around a while, but have such a large clientele base that you're slapped on a waiting list and treated like a number. Some providers are smaller outfits that have great communication and customer service, but don't have a huge online presence because they're busy doing the actual work that they specialize in. Some providers start with a bang and disappear in a flash because they didn't really understand what they were doing and tried to cut too many corners.

There are definitely some great ones out there! Turnkey investing is an awesome way to invest out-of-state. :)