Oregon Cash Flow

[Bill Horton]

I live near the Portland Metro area and my goal with real estate is to buy and hold to build passive income to replace the income from my job.  I currently do not own any rentals and only have experience buying two personal residences.  

I have been spending tons of time reading on BiggerPockets, listening to the podcasts, reading books and practicing analyzing properties off MLS.. I have looked at tons of properties on MLS and multi-family properties listed on Loopnet. I find it very difficult to find properties in the Portland Metro area that will provide a great cash flow after all expenses. I try to look at them with the 1% rule and 50% rule in mind..

I know that MLS isn't the best place to find a deal, but even if the prices were significantly lower, it still doesn't seem like it will work. Especially after hearing about the successful investors in Dallas or Phoenix, or other "cash-flow markets" where the prices are much lower.

I'm curious if there are any investors in my area who are buying and holding properties that provide good cash on cash returns and cash flow. If so, I wouldn't mind hearing how those properties have been acquired.  I am very tempted to pick another market to invest in, since I want cash flow.  It might sound dumb, but it just makes me kind of nervous not having easy access to the property.  I guess that might be something I need to get over.  Any good information would be appreciated!

[Mike Nuss]

In my opinion there are 5 excellent ways to get cash flow in Portland

• be proactive
• do not buy off of MLS
• buy under rented properties
• do value add through rehab and rent increase
• self manage your units

Portland is an interesting market. The romantic areas of town start at 5 caps and go down from there. It's tough to provide cash flow when the return on NOI is the same as the interest rate you're borrowing. That in and of itself means you're only getting the 4-5% return on the downpayment you've made.......unless you add value through rehab and rent increase. $400 a month more in net rent = $96,000 in market value (assuming 5 cap). That type of value add is really easy to do in Portland (most rentals in the midwest won't ever reach 96K in value, where as that is a common value add in Portland). However, most of the MLS properties do not have that type of upside. If they do, they end up getting bid up beyond the value add you want to make.

The best part of the romantic properties and close in areas is the tenants these properties attract. We have multiple 800+ credit score tenants, all with $ in the bank. They sign their paperwork, move in, pay rent on time if not early and are rarely heard from again. Most of the work is in the lease out. Saving that 6-8% in monthly property management (don't forget the expensive lease up fees) is significant in this market as the property management typically makes just as much if not more cash flow than the owner does in NOI.

@Bill Horton  you're sitting in a potential gold mine there in OC. Just my opinion, but there are a ton of vacant homes in the historic areas of OC close to downtown. Urban Renewal has done a ton for the downtown area and the developer from Tacoma is going to make waves with his Blue Heron Paper Mill redevelopment. It's probably worth your while to send some letters out in your backyard.