North Portland/Arbor Lodge House Hack

[Chris Wilburn]

Hi BP, 

This Portland market! Home prices are moving like crazy. Trying to catch a deal before rates hit 7%! 

My wife and I are searching for our second property in North Portland.  Our first was a 203K renovation purchase for our primary.  

Now we're looking for a house hack (should have started with the house hack, I know I know haha).  But since she is still a first time buyers we are still getting low down payment options. 

We want to run another 203K, this time converting a basment to ADU (Basically have to do everything: Permit, design, Egresses, full kitchen build, level concrete floors) as well as spruce up the main level. Running rough numbers, we'd want to get $1800/mo out of a basement 2/1 (with shared backyard). Is that competitive in the current market?

Hoping to get a pulse on where North Portland rents currently are and where we think they are headed with the way the city is regulating landlords and how Portland is on a slight population downturn.  Are people seeing rents holding, increasing with rising cost of home ownership?  

Thanks everyone! 

[Chris Wilburn]

Hi BP,

Longer overdue update to the 203(K) house hack project.

We finally found a property and the renovation is underway!

We ended up with a 3 bedroom/1.5 bath property. Our 203(K) plan is to convert to a 5 bed/3 bath. This includes the basement which will be a 2/1. The basement was partially finished, but did not have bedroom egress.

The main items in our renovation are:

• New water main from curb and valve
• New electric service and panel
• Add bathroom + convert to full bath
• LVP in 70% of the house
• Interior Painting
• Additional bedrooms in basement
• Kitchenette in basement
• Egress(x2) in basement

Our scope of work should create a great living space for us to grow into, but also provide a rental unit that competes (or even exceeds) the area offerings for medium term rentals.

A couple notes on our buy process for those who might be new to homebuying:

• We found a great location! I think the location will make it much easier for us to rent and hopefully reduce turnover.
• Once our offer was accepted, we sometimes felt that our agent was not fighting for our desired terms, but rather just trying to close the deal. We ended up not hitting our close date or getting the desired seller carry for closing costs. I think the lesson here is to interview potential agents about how they handle difficult communication, unexpected findings on inspection reports, etc. Absolutely lean on your agent as expert, but keep asking why if something isn’t going according to plan.
• If anything pops up in your inspection report that you are unsure about, bring it up to your agent and schedule additional specialist inspections if needed. If inspections aren’t possible, get the items in question written into the deal addendum (either as a concession or as a condition to close so that earnest money is protected if a solution can’t be found). Luckily for us the issue was not huge, but we missed the inspection window before we found that out.
• 203(K)’s have higher rates than standard loans, so consider the timing of your refinance (especially in todays environment). We are using a 2/1 buydown to extend our window to refi.
• Our lender was a bit all over the place for this loan and also contributed to our delay.  I don't think there was much we could do here, justt  a bummer. 

Simplified numbers on the deal:

Purchase: $499K

Renovation: $77K

Total loan: $578K

Est ARV: $685K

Refi LTV: 84%

If all goes well, we’ll be looking at 13% forced equity + 3.5% down = ~16.5%.

If all goes great, we can hit 20% equity and drop our PMI before buydown rate period ends.

We’re now in need of some good property management if anyone has a recommendation.

I know there’s some info missing in this recap, I’m open to answering any questions!

Thanks,