Agents in Oregon - Househack Brainstorm

Oscar Cardenas · 2020-09-20T09:09:38-07:00

Hello Oregon BP,I am an agent in the Salem surrounding cities and tend to get a lot of house hacking clients. The issue is that not many agents do these in the and they all think the process is easier than it actually is. Particularly starting 2019 it became more complicated.Here are the current issues with being competitive at buying small multifamily for house hacks in Oregon right now.-FHA is usually the only choice as it sticks to 3.5% down while conv jumps to 15% for most lenders on a small multi. Although I know a portfolio lender willing to do a 10%.-My biggest problem is that they have to terminate a tenant during the transaction. Due to the 2019 landlord/tenant laws, tenants living for over a year must be given a 90 day termination notice for buyer move in. The termination cannot be started after closing because owner occupied loans require a 60 day move in. This makes house hackers ALOT less competitive when buying... not only do we fight vs cash buyers but now a basic buyer is more competitive. The extended closing date doesn't seem to bother sellers much, but the starting of a termination does. I have previously suggested starting termination after appraisal, then closing 35 days later so the sellers don't lose a tenant to a random buyer but that still deters sellers from accepting.-The Buyers are generally newbies and tend to be less educated in the purposes of the different investment techniques. It takes a long time before they realize living in one side of a duplex with 3% down payment is not even going to get close to living for free. I see the purpose of a househack as an opportunity to grab an investment property for an extremely small amount compared to what a regular investor would pay. Just got to be careful that it cash flows on paper... that's the other issue, newbies think it should cash flow WHILE they live in one side. Most buyers so far are avoiding rent by the room single family homes so that is why I am specifying multifamily.Anyway, the FHA issue isn't too much of a problem for me considering the availability of escrow holdbacks for repairs and whatnot. The newbiness issue just takes a while for them to see it with their own eyes to start trusting more. The main issue is how to be competitive with Oregon's 90 day termination in relation with the Owner occupant loan 60 day move in rule. Anyone figure a way around this?

Steve Morris

Real Estate Broker · Portland, OR · Member since 2019 · 4k+ posts · 2k+ votes

6y

"The main issue is how to be competitive with Oregon's 90 day termination in relation with the Owner occupant loan 60 day move in rule."

Don't move to Portland. This and their go-away money rules have screwed any buy and rehabs on apartments.

Throw it into the "unintended consequences" bucket.

3 Reply

Oscar Cardenas

OP

Real Estate Agent · Salem, OR · Member since 2019 · 86 posts · 60 votes

6y

Definitely avoiding Portland lol. That 90day termination is now Oregon wide sadly. Damn Portland spreading their crazy laws!

0 Reply

JJ P.

Real Estate Agent · San DIego · Member since 2019 · 177 posts · 185 votes

6y

It's always hard to deal with ambitious but naïve buyers. It sounds like there are additional challenges dealing with the first time buyer who also wants a profitable multifamily purchase.

Perhaps you could create a graphic that shows the timeline options, or maybe your title company has one that they could give you.

0 Reply

Cory CarlsonBusiness Member

Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes

6y

@Oscar Cardenas Hey Oscar,

I work with house hack clients all over the state and am running into many of the issues you've presented here. By the way, I'm working with two owner occupied buyers and an investor with about $400k buying power in Salem, so lets network a little.

There are a couple points I want to bring up here and my interpretation of the Oregon Tenant/Landlord laws:

1. For single family and duplexes SB 608 requires 60 days notice. So following closing, a buyer with owner occupied financing can give notice the day of closing if the lender does not require a notice in hand.

2. For 3-4 units, yes notice needs to be given during the transaction process if the tenant. I either negotiate this to be done following the removal of the inspection contingency and open up the context for the potential of non-refundable EM. Have you done this? Again (and as you know), there is an exception that allows the seller to give notice if the buyer intends to occupy.

3. I totally agree working with first time house-hack buyers is extremely difficult (albeit sort of my niche). Not only educating them on the RE process, but the associated return metrics from buy/hold and owner occupied personal financing.

4. I am finding the owner occupied buyers are willing to pay more and i explain this to my buyers as the "price for terms" or "terms for price" scenario. If you want the owner to give the tenant notice prior to closing (terms), you need to come in strong (price). This is making my investor specific buyers with limited capital (<$150,000) less competitive with the sellers who are focused on price or have been poorly advised by their residential broker.

I am also finding a lot of these small multifamily properties are SO far being a good investment. Using the income approach and actually accounting for expenses from an appraiser/underwriters perspective (realistic expense load - management, reserves, repair/maint/turnover/, etc) these are all WAY priced out. I am watching 2-4 unit properties fly off the market in days THOUSANDS in the red zone.

If you are a small plex owner and interested in moving your money into the commercial and apartment market(s) NOW IS THE TIME. ^this is really our niche, helping investors quantify their current position in the portfolio and make a calculated decision on where to place the capital/equity. This is how I generally get my listings, investors selling several single families and moving their money into a higher asset value/yielding property.

We should hop on a phone call again and discuss.

503-222-0282

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1 Reply

Oscar Cardenas

OP

Real Estate Agent · Salem, OR · Member since 2019 · 86 posts · 60 votes

6y

Originally posted by @Cory Carlson:

1. For single family and duplexes SB 608 requires 60 days notice. So following closing, a buyer with owner occupied financing can give notice the day of closing if the lender does not require a notice in hand.

-----------------------------------------------------------------------------------------------------

I am also finding a lot of these small multifamily properties are SO far being a good investment. Using the income approach and actually accounting for expenses from an appraiser/underwriters perspective (realistic expense load - management, reserves, repair/maint/turnover/, etc) these are all WAY priced out. I am watching 2-4 unit properties fly off the market in days THOUSANDS in the red zone.

If you are a small plex owner and interested in moving your money into the commercial and apartment market(s) NOW IS THE TIME. ^this is really our niche, helping investors quantify their current position in the portfolio and make a calculated decision on where to place the capital/equity. This is how I generally get my listings, investors selling several single families and moving their money into a higher asset value/yielding property.

ah, you are bringing up the small landlord exception for 60 day no cause. That is definitely proof you do these house hacks as most people don't know about any of these laws. That exception was my initial go to but after thinking carefully the law specifically states

"Landlords who live on the same property as their tenant (owner occupied, 2 units or less) may still use a nocause eviction at any time."

Well, these buyers are trying to terminate a tenant on a property they do not currently live on so the exception seems to be void. After I asked an attorney he agreed. Lawmakers might have meant something else but that is how its worded and with the punishment for messing up being so harsh I stick to the 90 day buyer move in.

Still though, you brought up an exception that I have almost completely forgot about but is actually fixing another problem with Oregon small multifamily that I didn't mention. I am sure you noticed that most rentals here are very much under market rent, that exception gives a househacker the opportunity to evict a low market rent tenant which a regular investor cant.

As for your comment about small multifamily going thousands into the red I completely agree. It seems to have started just a few months ago that small multi here is appreciating at close to 10k/month for some strange reason. I went from seeing 270k for an average duplex to 320+ in a matter of about 3 months. At this point, I cringe when a realtor puts "Cash flowing" into the description when even if its brought to market rents, its in the red after expenses lol.

1 Reply

Cory CarlsonBusiness Member

Real Estate Broker · OR · Member since 2018 · 311 posts · 226 votes

6y

Originally posted by @Oscar Cardenas:

Originally posted by @Cory Carlson:

1. For single family and duplexes SB 608 requires 60 days notice. So following closing, a buyer with owner occupied financing can give notice the day of closing if the lender does not require a notice in hand.

-----------------------------------------------------------------------------------------------------

I am also finding a lot of these small multifamily properties are SO far being a good investment. Using the income approach and actually accounting for expenses from an appraiser/underwriters perspective (realistic expense load - management, reserves, repair/maint/turnover/, etc) these are all WAY priced out. I am watching 2-4 unit properties fly off the market in days THOUSANDS in the red zone.

If you are a small plex owner and interested in moving your money into the commercial and apartment market(s) NOW IS THE TIME. ^this is really our niche, helping investors quantify their current position in the portfolio and make a calculated decision on where to place the capital/equity. This is how I generally get my listings, investors selling several single families and moving their money into a higher asset value/yielding property.

ah, you are bringing up the small landlord exception for 60 day no cause. That is definitely proof you do these house hacks as most people don't know about any of these laws. That exception was my initial go to but after thinking carefully the law specifically states

"Landlords who live on the same property as their tenant (owner occupied, 2 units or less) may still use a nocause eviction at any time."

Well, these buyers are trying to terminate a tenant on a property they do not currently live on so the exception seems to be void. After I asked an attorney he agreed. Lawmakers might have meant something else but that is how its worded and with the punishment for messing up being so harsh I stick to the 90 day buyer move in.

Still though, you brought up an exception that I have almost completely forgot about but is actually fixing another problem with Oregon small multifamily that I didn't mention. I am sure you noticed that most rentals here are very much under market rent, that exception gives a househacker the opportunity to evict a low market rent tenant which a regular investor can't.

As for your comment about small multifamily going thousands into the red I completely agree. It seems to have started just a few months ago that small multi here is appreciating at close to 10k/month for some strange reason. I went from seeing 270k for an average duplex to 320+ in a matter of about 3 months. At this point, I cringe when a realtor puts "Cash flowing" into the description when even if its brought to market rents, its in the red after expenses lol.

SB 608, Page 4, Line(s) 4-7, Paragraph 8 "If the tenancy is for occupancy in a dwelling unit that is located in the same building or on the same property as the landlord's primary residence, and the building or the property contains not more than two dwelling units, the landlord may terminate the tenancy at any time after the first year of occupancy:

I'll just attach a screen shot. I interpret this as, buyer is able to request the seller/landlord gives notice for duplex's. 3

503-222-0282

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1 Reply

Oscar Cardenas

OP

Real Estate Agent · Salem, OR · Member since 2019 · 86 posts · 60 votes

6y

Hmm, I can see why you interpret that way. Going to send this to a different attorney to see if you are correct, where I read the exception was from a realtor site looked like a copy/paste version of the law but your picture looks to be coming directly from the source. Good stuff, hopefully you are right! now I am excited.

0 Reply

Oscar Cardenas

OP

Real Estate Agent · Salem, OR · Member since 2019 · 86 posts · 60 votes

5y