Portland metro rentals market buy and hold

[Demjan Van Der Kach]

Hello All!

Looking into Portland rentals: long term (12 months or more) . Purchase price up to 500k. Currently in Portland driving around. Interested in areas with high chances of positive cash flow with 20% down financing. Currently I am attracted to SW Portland including Lake Oswego and West Linn.

Very interested to know stats such as cap rates and more for different Portland areas.

Would be also interested to discuss with local investors and hopefully get into strategic partnership. 

I am from Phoenix, AZ.

[Mike Nuss]

This is a good thread. I like the real world examples. Multiple perspectives help give some actual insight to the current market. 

I think the main reason many people complain that Portland prices are so high, is because they don't really understand what rents can be in the Portland market (with the right A class assets). High end units can rent for $3,000 per month, on a long term basis, to amazing tenants with 700+ credit scores. They rarely bother you and are no where near "one flat tire away from missed rent".  

@Demjan Van Der Kach you have a ton of options in the Portland market. $500K with 20% down can get you a good long term investment in almost every market in Portland. 

However, what I don't think has been pointed out is that your exit strategy really is a "flip" and I haven't heard anything about equity. Please excuse me if this comes out wrong, but this seems like pre crash activity to me. Leveraging a "rental" for 12 months (I'm assuming to avoid short term capital gains) and banking on appreciation, while buying retail is super risky. 

Anything less than 6% appreciation will most likely result in a loss. Selling has costs which some people misunderstand. Those can/will offset an appreciating market, so you need to be buying with a discount to make this strategy successful. That's difficult to do in Portland without a lot of action and/or intimate knowledge of submarkets. Working with an agent on RMLS, without having a rehab budget in mind (to force appreciation), could bring even more risk to what could be a less than stellar acquisition. 

I understand the 400K of leverage in the equation could result in a nice little return on your 100K with just a few points of net appreciation, it's just risky in my opinion. You can easily over pay, can easily see a slight shift in the market and concessions become a norm, you can see less than 6% appreciation, your tenant could trash the building, not pay rent, refuse to leave, etc..

If a 12 month resale truly is your exit strategy, there are probably a lot of lower risk ways to invest, that would result in better cash on cash return and less hassle.