Investing in Portland Metro Area Rentals

[Cameron Rouse]

Attention Portland, OR investors; If you were investing in a rental property in the Portland metro area, what area of town or outskirts would you invest in if you had a 150K-300k range?

I'm 28 years old and purchased my first home 3 years ago in a good SW Portland area, rehabbed & rented it, and now have a home producing $500/month cash flow with 150K in equity in it.

I just purchased a residential home near downtown PDX by OHSU on Marquam Hill that I plan to rent out in a year. While it is in a great area, I don't think I will have positive cash flow on it. I'm thinking I may have made a mistake on this decision... I'm hoping that since I have a long term buy n hold strategy that it will work out.

While I would love to purchase more rental properties in SW Portland, I'm thinking I should look to invest outside of Portland since it seems rather hard to find cash flowing properties now.

Any advice or experience you would like to share would be appreciated. Thanks

[Mike Nuss]

Hi @Cameron Rouse here's a long reply for you. I apologize in advance...

It sounds like you're living in Marquam Hill for a year? That's a great pocket. Kind of isolated, but tree house cool. What's your PITI? Negative cash flow is a no no, but that definitely is a location to hold on to if you can. Maybe some kind of creative rental strategy could help make holding it more bearable in the short term. Any chance it is a historic home eligible for special assessment?

My thoughts on SW Portland 

There is one big reason why SW Portland is one of the toughest markets for rental property acquisitions that make sense. That's Property taxes. Properties in SW Portland typically have higher property taxes because the west side had higher valuations during the 1990's property tax measures. 

I missed out on a John's Landing duplex last year simply because property taxes were $6,000 (my inner east side 4plexes are less than $5,000). I could've offered another $200 per month in principal and interest payments, if the property taxes were in the $4,000 range like they should be. I knew that. The seller knew that, but that was the difference between me buying her duplex and it going to the open market where we both knew it would sell for more. 

I love inner SW Portland, especially Lair Hill, but the property taxes make SW Portland almost unbearable. For this reason I focus mostly on the inner east side. I market to the west side,but I don't really get excited about it.  

Getting on to your post though...

Where to invest?

I have to answer your question with a question. Where would you like to invest that is not SW Portland (for the reasons I just stated)? What is it that you want to accomplish? Why do you want to accomplish that? and How are you going to accomplish it?

In my opinion, It's a lot easier to work in a market you love. There are a lot of areas that have better price to rent ratios that Portland, but those areas doesn't get me excited so I don't consider them. Inner Portland gets me very excited so I focus in those areas. Go invest where you will easily stay motivated to do what is necessary to keep momentum flowing. You matter, the market doesn't. 

150K is plenty 

I wish I had the knowledge at 28 that I do at 37. I was looking at real estate through the same conventional bank financing mumbo jumbo that most people do, rather than focusing  on product (inventory), money (private lenders and sellers) and clients (renters, assigns, retail buyers). Conventional real estate methods keep you from honing in on the fundamentals of real estate. Getting face to face with sellers, getting face to face with lenders (brokers don't count), getting face to face with tenants, bureaucrats, title reps, planners, etc.. is what matters. So many people think real estate investing consists of realtors, banks, inspectors and escrow. There is so much more to it than that.

You have plenty of $ to invest in the market you want to invest in and do really well. If you really want to kick *** in real estate, learn how to be a professional at acquisition. Learn values, market rents, NOI, financing and the players in your market place. Talk to owners with investment grade real estate. Everything else falls into place from there.

You're 28 years old so you can really do what you want to do. Take it slow and buy a property "here or there" if you want to or become a mogul. It's all up to you.