Investing outside of Portland OR?

Question

Quick question for investors who know the Portland OR MSA. I’ve had a pretty strict thesis to only buy core Portland properties but lately have been seeing deals in Tigard / Beaverton / Hillsboro.

I hear both that outlying areas are starting to slump which makes me nervous to do anything there, but also the financials of the properties there make more sense. It seems to me that core properties should appreciate nicely and never lack for tenants and I’m just not as sure about investing outside the core.

I am curious as to people’s thoughts here on the subject from those who have done it / and or have a good thesis for yes or no?

As far as goals I am less concerned w. Cash flow today (though it’s nice as a buffer and margin of safety...) and more focused on acquiring great located assets that are lifelong holdings. I have a (not unique) thesis that Portland is a great place to keep investing and buy & holding and am just not sure my thoughts on the outlying parts.

Jay Hinrichs · Answer

I would not consider those cities in the boonies they are in the metro area and frankly could be better than Portland proper less govmit less tax's  no city of Portland business tax  etc etc.

I sold an 80 unit and a 40 unit in Gresham to one of my clients and that thing has done nothing but make them money..

Benjamin Ficker · Answer

Are you looking at multi-family or SFR?  There's a much lower cost per door in the suburbs of Portland and a lot of opportunity to grow those rents and the core becomes more and more expensive.  Most of our clients are looking outside of the core at the moment as most of the numbers are tough to make work.

Mike Nuss · Answer

@Arie Van Gemeren

I agree with @Jay Hinrichs. The cities you mentioned are part of metro....not the boonies.

Portland metro saw similar trends as the Bay Area  you just mentioned. However, that type of reaction (outer areas seeing sharper declines) had more to do with the areas having more cookie cutter subdivisions and available land than anything. The core just doesn’t have enough land so there will always be a tilt toward under supply than an outlying market.

There are pros and cons to any area in the Pdx Metro market. $/unit are lower the further from the core you go, but rents are lower as well. We are seeing a trend we’re competition (demand) is heating up outside the core while options (supply) are increasing in the core. Supply/demand and effective purchasing power are what I look at for location trends in our area.

Management is extremely important as well. Property management in Portland will get tougher and tougher as long as Chloe Eudaly is on the city council.

I’m happy to chat more specific details if you’d like.

Stacy Davis · Answer

Born and raised in pdx, out in the country of Oregon City. I would agree that Tigard/Beaverton are good long term hold areas. Oregon City, Canby, and out the opposite direction are good as well.

Stacy Davis · Answer

Born and raised in pdx,, out in the country of Oregon City. I would agree that Tigard/Beaverton are good long term hold areas. Oregon City, Canby, and out the opposite direction are good as well.

Mathew Wray · Answer

Morning Artie!

Sounds like you’ve gotten some good advice here-I’d also suggest considering Oregon City to the SE of Portland. It avoids the Milwaukie/PDX issues and keeps you out of Multnomah County.

That being said, it really seems like you’re focusing on going west. Good opportunities out that way as well, just a different tenant base. Whole western area is supported, in my opinion, by a couple of big employers-Nike and Intel. Housing can be influenced by their labor and business decisions. Being aware of that (assuming their employees are your targeted tenant base) and taking the long-view will help keep you going through the ups and down.

Best of luck!

Mathew

Steve B. · Answer

@Arie Van Gemeren it seems you are unfamiliar with the area.  As Jay says these suburbs mentioned are becoming demographically and geographically integrated into the sprawling metroplex of Portland.  You are not going to see much of a divergence in their performance relative to Portland proper.  You can’t compare SF/Stockton to PDX/Tigard in any way.

Jeff S. · Answer

It is true @Arie Van Gemeren that the farther out you go the bigger hit you take in value when the economy recedes. You mentioned Tigard; within Tigard is Bull Mountain, an area of very nice homes that lost around 60% of value during 2008-09. Hillsboro is farther and got hit and Forest Grove was awful.

Beaverton is more residential and good but you will not find "hip and cool" like you do in the city. Some people say run from Portland while others love it. Portland has been good to me. Appreciation has been huge and the rental demand has been out of this world. Hard to know what happens next as far as prices go. My understanding is multi's more competitive than SF.

Eastside going out gets dicey but better cash flow-gangs in Rockwood and Gresham hit and miss. Westside Hillsboro supposed to have highest rents which is something I don't get.

@Jay Hinrichs keeps mentioning @Mike Nuss. He is doing cool things close in Portland-maybe he can help you. They do brokerage work too.

Jay Hinrichs · Answer

ya not comparable.. central valley and Sac are 60 miles from SF bay area.. this is more like Walnut creek Moraga concord Orinda.. these cities all BORDER Portland.. I used to have a condo above the bridge I was in WA county.. across the st. was Multnomah may tax's were way lower.. I would personally always look to be in any county but Multnomah..  you will be fine in any of the neighboring cities.

Arie Van Gemeren · Answer

@Jay Hinrichs thank you for the feedback. I am starting to lean in the direction you're suggesting, and am finding that the numbers in the core are just getting out of wack. Good to know your opinion on those markets, too - they feel relatively outside of the core, but I hear what you're saying.

@Benjamin Ficker thanks as well. Primarily multi-family at present.

Basically, to summarize my concern, I just worry that history may repeat itself - to cite a local California example - prices ran up a lot in the run-up to the Great Recession in core markets, and pretty soon everybody was buying hot properties in Stockton and outside of Sacramento. When the market crashed those "hot properties" that were "affordable" became total liabilities and almost unrentable, while prices in the San Francisco Bay Area dropped maybe 15% in total. I think that Beaverton/Tigard and others are not quite the same as sprawling new developments outside Sacramento (perhaps more comparable to the San Francisco East Bay, to cite a local examplea gain), but on the other hand in the event of a significant downturn you maybe are more protected in the core. That is the gist of my concern about deviating from the aforementioned strategy. However, it's not really an apples to apples comparison.

Investing outside of Portland OR?

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