Overview of STR Inventory and Multi Family house hacks in Oregon

[AJ Wong]

As spring (slowly) approaches, the quantity of listings on the Oregon Coast will continue to trickle upwards, a good sign for buyers that have been looking to take advantage of the recent drop in mortgage rates. 

In the five years I've been focused on vacation rentals on the Oregon Coast, primarily from Bandon north through Pacific City, at present there are more existing and eligible vacation rentals than in recent memory. The main reason for this is a recent update to a waitlist in Lincoln City that has expanded eligibility for specifically zoned properties. On our STR HOT List at the moment we have at least 50+ properties that are either existing vacation rentals or eligible for new STR permit and project well as full time nightly vacation rental properties.

To give an idea of the market here are some examples of recently sold and active coastal vacation rentals and their current and projected production: 

- Oceanview 4/3 SFR. Existing average $50k Gross with personal usage time. Projected $65k+. Asking $699k. Sold furnished.

- Oceanfront 4/4 SFR. Sold. $1.5M w/ 1% seller concession. 15% down second home. $135k existing production with subpar PM. $150k+ projected gross.

- Walk to Beach. 3/2 SFR. $430-460k Asking. Existing Gross Production $35K part time..Projected $45k+.

- Oceanfront. 4/3 SFR Asking $899k Existing production $75k. Post upgrades projected $85k-95k+ Gross

One topic I have not discussed regularly is the multi family market. Having sold five duplexes in the past 1.5 years and several multi family 5+ Unit properties I wanted to shed some light on house hacking in Oregon and some nuances of the long term rental market place. 

Mutli family along the coast is limited, expect to invest $100-125k per unit for a 1/1 and $200-275k per unit for larger 2/2 or 3/2 units. The challenge can be that Oregon has its form of rent control and so long term tenants could have rents that are well below market. The maximum rent increases for Oregon are the lower of: 10% or 7%+CPI per year. 

Depending on location and condition recent rents for a one bedroom are $12-1500 and 2-3 bedrooms are from $1500-2300. These could be increased with modern furnishings and leased on a MTR basis or combination of usages. 

Examples includes a Newport six plex for $645k, Two small detached homes on a single lot in Lakeside for $237,500 and a north coast duplex with very large 3/1.5 units for $560k+/-. 

Landing a higher rent reliable tenant on the coast can take a little time as it is very transient, but often landlords find quality tenants in young families relocating to the coast, those employed in the medical fields, Coast Guard and State workers relocating to coastal cities. Long term management fees range from 8-10%.  

Along the I-5 corridor in the University cities (Corvallis & Eugene) and beyond (Albany, Salem, Junction City) there is also healthy interest and competition in multi family properties. We sold a Triplex last year for $505k and a recent Duplex for $421k+/- both received healthy seller concessions and planned to be owner occupied utilizing rents from the other units to reduce their costs of living. Both buyers were younger couples, investing from out of State or larger metropolitan areas. Listed rentals often have high competition and multiple applications. 

I'd say the critical component to securing a worthwhile multi family investment (and any real estate for that matter) is timing. Oregon is a very small market and growing rapidly. There is likely to be high levels of interest and competition. Both of the properties referenced were previously in contract with other parties prior to our clients securing them. It is suggested to have a strong Pre Approval lender and resources to tour the property as close to listing date as possible. 

With both Oregon Coastal STR's and Multi family property acquisitions, patience and tenacity of purpose are paramount.

[Taj Richardson]

Quote from @Jay Hinrichs:

Quote from @V.G Jason:

Quote from @AJ Wong:

Quote from @V.G Jason:

Are these prices "soft" compared to market expectations? I'd never step into Oregon from a LTR view but I have had it on my list as a STR target. And if regulations pivoted, I would use as second home. My priority is Hawaii this year among a couple of others, but if I cannot swing then Oregon moves up.

We're on the same wave. OR to HI is a common theme, actually a lot of overlap of seasonal owners that go between. I'm working towards a space on Kauai in the next 4-5 years.. DM me I'll send you a link to out HOT sheet. You can view most all eligible coastal vacation rentals and I have about 30-40 Pro Forma. List on my website of all our recent sales. In general 10% of valuation in gross annual income. I have seen luxury rentals sell in the $2M range that generated over $275-300k but they move fast. More common is the $500-750k range with oceanview or walk to beach STR that generates between $55-85k gross.

 I would want on beach & something unique to it and pay the extrinsic. Something that I can either add to it to make it the most unique, but indisputably the best or near best location. When I was looking before it was mid 3s on that, but very few. In Hawaii, it's a multiple of that and they go super quick.

I won't bark up this tree until I'm closer to it. I'm getting my Angel Fire spot and working Hawaii concurrently, and the latter is proving to be hard. If I get exhausted from that, I'll pivot.

couple issues with the Oregon coast.. I had a 125  unit project all approved in Lincoln city  ( next to the outlet mall) and rents simply would not justify the build costs so we sold it..  Then the other thing is Oregon coast is just Brutal on maintenance especially ocean front or near.. so need to up your cap ex.  Seems to me Cannon Beach is kind of the hot spot..  I dont personally find much to like about the Oregon coast other than in my business I would never spend time there.. Expect to fish.  But the closer you are to PDX I think has value.. Or something in bandon and cater to the wealtheir golfers that come to Bandon dunes.  Of course thats just me and my personal likes and dislikes.

I agree with Jay, the Oregon Coast is not for pure investors. If you are strictly looking for cash flow returns there are far better options than the Oregon Coast. Are there a few gems out there, sure, but you have to be a serious hunter to find them. We don't have wholesalers out here; no real investment focused real estate agents either. Most Coast agents are semi-retired/don't need the money type agents who will sell you what's on the MLS only, and there are no deals on the MLS.

That being said, if you are interested in the long game on the Oregon Coast, the equity appreciation is hard to be. I've tracked the average sold price of homes on the Central Oregon Coast since 2000 and they average 10% appreciation year over year. The key word there... Average. I don't expect that kind of return over the next 1-3 years, in fact I think flat for a year or two then a downward trend for a few years after that... But I'm just crystal-ballin' so believe your own crystal balls on that.

The Oregon Coast for investments only really makes sense for people who just have the dream of owning real estate on the Oregon Coast and hope to maybe break even on cash flow after a few years of ownership, and there are plenty of people interested in that. The only really decent investments on the Coast for your average run-of-the mill investor or person wanting to protect their money in real estate is in short term rentals. There's a reason there isn't a lot of big money on the Coast. 
If you dream of owning on the Coast be very cautious of regulations against STRs, most communities are not STR friendly and some towns have revoked STR permits (lawsuits galore on that), so talk with an Oregon Coast based agent who KNOWS STRs or you could end up with an investment you can't rent and just have to wait out all the expenses of ownership until the appreciation kicks in.