Portland, OR house - sell, rent, short-term rent?

Question

I'm looking at options for my current residence (3 BR, 2 BA house) in Portland, OR. I'm not sure if it makes sense to sell and invest elsewhere, or rent it out as a long term rental. (Portland doesn't allow whole 3 BR houses to be rented out as short term rentals.) We have about $190k left on the current mortgage at 3.75% interest and about $360k in equity. I'll need about $200k to buy the next house, so if I'm not selling I need to get a home equity loan. There are a few questions I think BP can help with:

1. Does anyone have any legal advice for managing a long term rental single family house in Portland? (Attorney and PM contacts would also help.) I know it's a very tenant friendly city, so I'm worried about the legal side of things and I want to get everything set up the right way.

2. Getting the right terms on the home equity loan is the key to keeping it as a rental from a cash flow standpoint, keeping the favorable existing 3.75% mortgage intact. Any recommended investor friendly Portland lenders out there that I should talk to?

3. The alternative to renting out this house is that I could take about $100k from the sale and invest it elsewhere. I'm comfortable with new development, or in Ohio rental markets (Columbus, Cincy, Dayton metro areas). Obviously understanding these investment alternatives would be on a case-by-case basis but my gut says the low interest rate on the existing mortgage makes the existing house the most fruitful deal since the Portland market has been appreciating faster than Ohio markets for the past 20 years. Development might also make sense if construction and land prices pull back a bit. What are other people's thoughts on this option?

I'll gladly repay any advice or suggested contacts with architectural advice (~15 years experience, mostly in new multifamily apartments).

Thanks in advance everyone!

Kwame Amoako · Answer

Hey Justin!

I have a few questions for you,

1. What could you get in rent for your house in Portland?

2. Are you primarily looking for cash flow, or do you just want somewhere to park your cash for appreciation?

I think if you are after cash flow you should sell and take your proceeds and buy in Ohio for cash flow. According to Redfin Columbus and Cinncinati have actually appreciated more than Portland over the past year. So there is certainly the opportunity to cash flow well and achieve appreciation by investing out of state over time.

William Sing · Answer

@Justin Cloyd,

Congrats on starting the investment journey! It seems that you have a lot of options at least.

1) Does anyone have any legal advice for managing a long term rental single family house in Portland? (Attorney and PM contacts would also help.) I know it's a very tenant friendly city, so I'm worried about the legal side of things and I want to get everything set up the right way.

If you are going this route, find yourself a good property manager. Usually, you only get to the attorney part if you have a troublesome tenant. I'd check out rarebird (they are a local and have A LOT of experience). You can contact Eric Guess there. Doug Moe with 24/7 properties is also great as well. They can direct you to attornies if it gets to the point of needing to evict someone. If you are going the self-manage route, I'd take a look at the local landlord association. They have classes and forms you can buy. Here is a link to them - https://www.portlandarearoa.co...

2) Getting the right terms on the home equity loan is the key to keeping it as a rental from a cash flow standpoint, keeping the favorable existing 3.75% mortgage intact. Any recommended investor friendly Portland lenders out there that I should talk to?
At this point I would look more at HELOCs (they are different than home equity loans). You will currently not be able to find a great cash-out refi that makes sense with an interest rate. You might be able to do the cashout refi and buy down the rate significantly, but I don't think you can buy it down that much. Contact Cori Angel at Bank of England (DM Me if you want her contact info or Google it) and you might be able to talk to her about getting creative.

3) The alternative to renting out this house is that I could take about $100k from the sale and invest it elsewhere. I'm comfortable with new development, or in Ohio rental markets (Columbus, Cincy, Dayton metro areas). Obviously understanding these investment alternatives would be on a case-by-case basis but my gut says the low interest rate on the existing mortgage makes the existing house the most fruitful deal since the Portland market has been appreciating faster than Ohio markets for the past 20 years. Development might also make sense if construction and land prices pull back a bit. What are other people's thoughts on this option?

I called about 8-10 of the local banks and bigger ones and found Keybank has the best HELOC program and OnPoint is the second best from the research I did. DM if you want me to send you some good contacts for the HELOCs. This would help get you the 100k you are looking for.

Development would be an interesting prospect. It would consume a lot of time and take a builder who can help you realize that. We are still way under the amount of homes to meet demand right now. This would be a large time suck though and if you are looking to build in Portland it will be a permitting nightmare.

Ultimately it boils down to what do you want to do in the future? What type of investments do you want? If you want to do something that will lower maintenance and you oversee I'd look at going out of state. If you want to do a bit more work and stay local, I'd look at Salem or something a bit further outside of Portland to reinvest.

If you want to have fun theorizing and talking let me know! I'm a big fan of architecture and would love to understand building multifamily apartments. DM if you want to set something up or you can set up a time using this link if it is easier https://calendly.com/agentlivi...

Remington Lyman · Answer

You should house hack locally and then buy remotely in Columbus, Ohio after

Kurt Lane · Answer

Hi @Justin Cloyd,

Feel free to drop me a line if you'd like to discuss options for renting your property. I'd be happy to put together a rental analysis for you. We end up working with a lot of SFH owners who want to invest in Portland, but don't want to navigate all of the regulations. If you do decide to self-manage I would recommend becoming familiar with the FAIR Ordinances, Portland's rental relocation assistance, and Oregon SB 609 (that's the statewide rent control law). You'll also want to make sure to use leases and addendum from Multifamily NW. They allow you to purchase individual forms online.

Best of luck!

Dave Skow · Answer

@Justin Cloyd- if keeping the property - consider 1st mtg cash out refinance as the rate will be higher but the total payment could be a better deal that the total of a new heloc and the present 1st mtg

Zac Lindquist · Answer

Hey Justin!

I was in a very similar position that you are in now. My wife and I just bought a duplex in Milwaukie that we were self-managing. Once we moved out and I decided to sell, one of the tenants became a nightmare and I will never self-manage again because of the headache it caused even though we did everything right. With that experience, I did manage to come up with a great real estate attorney and PM if that's the route you choose.

I am a licensed realtor in Oregon and sold our property in March and funny enough we 1031 into a triplex in Columbus OH that is under a professional PM. I found all my resources (Realtor and Lender) here on BP and our agent referred us to a PM that he uses for his own investments. Obviously I am biased towards moving into a new market, but it has been a great move for us to no longer self-manage and not be in such a strict law environment. We have increased cash flow, peace of mind from not having to deal with tenants, and a property that is still going to benefit from strong appreciation and rent growth just like we saw with our last property.

I'd love to connect more to just speak about your journey, answer any questions about mine, or see if I can be of any more value to you!

Sergey A. Petrov · Answer

Keep the house and rent it for now. You have 3 years before you start worrying about capital gain taxes. The market is softening (Portland included although I am in Seattle and not super up to date on Portland). You’ll likely get more for the house when the market bounces back (hopefully in under 3 years). You’ll likely get less for the house now than you would have just a few months ago. Keep your existing low rate mortgage untouched. If you need cash for the next house (or an investment property be it a single family home, a duplex, or a four plex where you occupy one of the units), get a HELOC for now and watch the markets. A permanent refi might make sense if the rates come back down (personally I doubt they will in the couple of years), pay off / pay down the HELOC over time if you want, and keep on going. You already have a leg up with your sub-4% leverage rate.

Portland, OR house - sell, rent, short-term rent?

Portland, OR house - sell, rent, short-term rent?

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