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.