1% and 2% rule in Vancouver Wa. and Portland, Or

[Kent Nielson]

Buy and hold investors around Vancouver and Portland. I'm curious how you deal with the 1-2% rule. Do you lower the percentage to make a deal work or do you just end up putting more down? Or just find extremely good deals??

Also on new construction would it be safe to lower your estimate for repairs and especially cap ex, since everything is brand new?

[Carter Thomas]

@Kent Nielson

I own a few rentals in the area but I wouldn’t consider myself super experienced so I defer to the investor pros on Bigger Pockets.

However if you bought a long time ago your current rent is now 1% of your original purchase price; but that could potentially take 10yrs. Some people bet on rent appreciation to eventually satisfy the 1% rule. But as @Brandon Turner says appreciation is speculation.

Some would argue that the main value in the Vancouver/Portland market would be in appreciation. Sometime breaking even or even being negative cash flow is worth it because of extremely high appreciation (NYC, San Fran... ETC).

If you’re buying in this current market and the rent covers the mortgage and expenses then there’s high value in the loan paydown since the houses here are worth a considerable more than in the South or Midwest.

One of my rentals doesn’t satisfy the 1% but with the cash flow, average appreciation, and loan paydown it adds a total monthly value to my net worth of $1,600. So even though it’s lower cash flow it still adds lots of value because of the large loan being paid down and the appreciation amount is high because the houses simply cost more.

As for new construction, new houses will need less immediate repairs than an older house which means that you have a much longer time to save up a repair fund for that future roof replacement.

Three of my rentals were all built in the last 4 years and collectively I’ve had to make 2 small minor repairs.

I hope that helps.