All Forum Posts by: Account Closed

@John Cava, if he's selling to you rather than going through MLS, there's probably a reason why. A well-priced MLS property west of 82nd would likely get bid up and sell for more than what he'd save in agent's fees. So what's his m.o., I wonder?

What @Mike Nuss said is truth.  Everything is negotiable.  Find out what his motivation is and work with him based on that.  It could be that he just doesn't want to see his home demolished for some emotional reason and he'd be willing to accept 0 down and 4% interest over a 30 year amortization with a 10 year balloon.  Or no payments for 6 months so you have resources for your rehab.  Or 10% down and interest only payments.  Or some combination.  Or anything you want.  You never know until you ask.  

It might help to give him a formally written offer spelling out not only your price, but also the terms. (Ideally in REI, if the seller gets his price, you would get your terms.) Formal offers bring everything from fantasyland into reality, and it's where you'll find out what the seller will truly accept. I recommend meeting and speaking in person if possible. I heard a great negotiating question on a podcast the other day: "Mr. Seller, what price did you realistically want [to net] for the property?"

People also like to see the logic behind the offer.  So if it's maximum price he's after, you could show him how much $$$ he'd get with your offer after you pay all the interest and your balloon payment--all that while earning monthly cash flow!  Compare that to adding up all the closing costs and holding costs and agent fees etc. he'd have to pay (plus the hassle factor) if it were listed, with his net on the bottom.   I've had success bringing sellers back to reality (or at least to my side) by outlining the reasoning behind the numbers I provide.  

@Marc J Brooks Welcome!  "Don't wait to get started" is good advice if you have at least a rough plan, a little knowledge, and some idea of your various potential exit strategies.  There are people who listen to podcasts and read forums like BP but who never jump in because they're afraid (which is not necessarily a bad thing, just something to keep in check, IMHO).

If buying a turnkey REI program is the only way that you think you'll get over your fear of starting, then maybe, if you think REI is for you, that would be a good way to start. For me, I have made decisions about where to spend my money when I felt excited about a shiny object, and then sometimes regretted it later. For example, I bought an annual membership to the local REIA and went to a RareBird meeting later that same week, and then questioned whether the REIA was the best fit (between the two) for my personal needs.

Hindsight is 20/20 as they say, and you don't want to be the person who, once you educate yourself more, regrets dropping $30k (or whatever) to learn what you might have been able to learn for, say, $300. Or for free.  There's no rush to buy a rental or to flip a house.  If ANYONE, including yourself, makes you feel rushed, then that might be a good sign to step back and reevaluate.  I had an agent in Eugene who, in 2006 when house prices were rising, told me, "there's a finite supply of land, and you don't want to get priced out of the market."  I was a first time buyer/grad student living on student loans at the time. Glad I didn't let my fear or her pressure influence me.  

I ended up buying my first property--a duplex in North Portland--in early 2012.  Win.

I've been listening to the BP podcast from episode 1 and just heard #41; you might find what the guest says about his experience with gurus helpful: http://www.biggerpockets.com/show41

Portland, we need an electrician, preferably a one or two person shop that doesn't have the overhead of a large commercial outfit.  Who do you love?  

Thank you a lot in advance.  

I would use part of the $30k as a down payment on a 2 to 4-plex with a VA/FHA/USDA loan, fix up one side and rent it out and live in the other side while you fix up. I won't dissuade you from wholesaling here, but it might be a while before you find a deal as the market is saturated with flippers and wholesalers (unless you know the secret sauce for finding those deals).

VA: no down payment needed.

USDA: I think it's no DP but you have to be in a "rural area," which includes the city of Sherwood and Yamhill counties.  

FHA: 3.5% down plus mortgage insurance for the life of the loan (or put 10% down and you can remove PMI after 11 years)

Conventional: 15% down on an owner-occupied duplex plus PMI until LTV is at least 80% and you have the bank reevaluate the loan, or 20% down to avoid PMI.

You can find a duplex in Portland for $250k and in outlying areas (Columbia county, Clackamas county, Yamhill county, East Portland etc.) for $200k.

There's also private lending and hard money, but that depends on your network, your means, and your tolerance for risk.

Another option is to partner with someone with more money than you, and you can contribute to the project in other ways (managing, finding the deal, etc.).  

All that said, for your first property, buying it simply with a bank loan and living in it for at least year is, in my opinion, one of the best ways to learn.  You don't have to know each and every RE investment strategy before you start.  Once you gain some experience, it will make it easier to find people willing to partner with you.  

Whatever you do, just make sure that you're getting decent cashflow (I aim for monthly rents covering 1% of the ARV) and that the repairs won't bankrupt you.  Pretend that the unit you live in will be rented, and then do the calculations based on market rents, taking debt service into account.  https://www.biggerpockets.com/buy-and-hold-calcula...

Do your research and buy in an area that has a better than average chance for appreciation so you can trade up later for a "better" property (whatever that means to you) using a 1031 exchange or owner-occupied tax break for capital gains (if that's what you want to do).  Or hold onto it if the cashflow is good and look for your second property when you're ready.  

At least, that's what I would do.    

I allow pets because it gives me a competitive advantage.  Also, many people have pets in Portland.  Personally, I think it's a tragedy when someone abandons/relinquishes their pet because "the new landlord doesn't allow pets."  The renter should find a place that allows pets, or not have a pet in the first place, but if more landlords allowed pets, fewer animals would get euthanized.  

This same discussion came up last month:  https://www.biggerpockets.com/forums/311/topics/26...

@Jon Nelson I got it from Eagle Aluminum in Minnesota, but there are other places to get it as well.  

Regarding granite, and this is my personal opinion only, but I think granite tiles look cheap.  I also think granite slab looks passé and, in my opinion, the pattern is often way too busy. (And yes, a lot of granite registers on the Geiger counter.)  If you're going to spend the money on granite anyway, then I recommend quartz or recycled glass instead. You can get inexpensive quartz for $40/sf including installation at IKEA, though that price is for the ivory color only.  If your clients care about perceived "sustainability," then recycled glass is durable and unique and comes in many different colors. It's not a "low-cost" option though, so I suppose this is where you would need to prioritize--recycled glass adds a certain wow factor.  

Other than that, Consumer Reports could be useful to you @Account Closed and may answer your countertop question once and for all.  

@Account Closed What is the overall aesthetic of the building and what kind of tenant are you catering to?  I realize your project is more upscale, but that could mean many different things.  Is it young millennial professionals or retired empty nesters?  Is the building 10 years old or 50 years old?  Sometimes the building itself will answer your questions for you.  

For example, I have a 1958 duplex in inner Portland.  The neighborhood appeals to millennials and hipsters and the housing stock was typically built from around 1910 to 1960.  I capitalized on the architecture of the building and rather than gutting the place, refreshed the original cabinets, installed period-appropriate lighting fixtures, got a new stainless fridge but found a vintage Frigidaire wide-coil stainless steel cooktop and installed a new stainless 18" dishwasher (where there previously was no dishwasher at all).  I paid attention to the details (pull-out chrome faucet, USB charging station, light aqua paint, vintage cabinet pulls, LED lighting with a high color rendering index on a $12 dimmer) and didn't spend a huge amount on countertops.  Instead, I got a $130 sheet of "white ellipse" Formica and ordered some metal edging from a metal extruding company in Minnesota and had my handyman install it.  

The edging really made an aesthetic difference but was only $25 per 12 feet, and I used the same Formica for the backsplash, installing it all the way up to the cabinets.  No one who came to see the place said, "ew, laminate countertops."  Instead, they drooled over the USB charging station and wide coil cooktop and swirly patterned linoleum floor.  They loved the metal edging and its retro-cool factor.  For context, rent is $1700 for a 3/1 and it's shared by three women in their 20s.  They pay all their own utilities except garbage.  

The moral of the story is, if you know who your customers are and pay attention to the details that they care about, the decisions will take care of themselves.  (Designers also help, but I happen to be one so I didn't have to hire one.)

p.s. If doing laminate, I recommend hiring people who install it often.  My handyman flubbed in a couple places, which you might notice in the pics below.  

Congrats @Evan Bellingar!  May I ask, how did you do a commercial loan for what amounts to just 2 units?  I thought commercial loans had to be 5+ units?  

I've been looking for a small commercial apartment building because a commercial loan is easier to underwrite than a residential one.  If you have any tips about using a commercial loan for less than 5 units and/or if you can recommend a good local lender who does that, I'd welcome your insight.  

I haven't been to Newberg much, but it intuitively feels like a good investment --> Newberg : Portland as Napa : San Francisco circa 1995.  I lived in Napa in 1993 when it was still a sleepy almost bedroom community.  Now, it's all grown up with fancy restaurants and trendy music festivals and pricey tourist traps.  People who bought property there back then and held onto it are doing very well.   

I live in a trendy area of inner Portland.  I'm nowhere near the level of @Brian Burke in REI, but here's my take on the city.

Yes, there are companies moving here (including Under Armour) and population is projected to increase at a steady clip for the next 20-ish years.  But the people who would move here for big corporate jobs, I would imagine, would be interested in SFRs in the suburbs, close to their workplace (Nike, Intel, SalesForce etc. are all in Beaverton or Hillsboro).  Maybe this will have a trickle-down effect for all housing stock in the Portland Metro, jacking up prices for SFRs and pushing millennials and working class people to apartments (Brian's niche).  And there is and already has been a ton of MF development in Portland since 2012-2013 or so.  

I'm sure there's room to grow, but rents have got to stabilize somewhat within the next 1+ years because a) there are more units available from new construction, and b) the young creatives that this city attracts can't afford to live here anymore.  And we don't have the same type of economy as SF or NY to support those high rents.  

That said, I think there is room for creative developers who incorporate elements like microhousing and co-housing and other quasi-shared living situations and who provide the types of amenities millennials want (gyms, dog washes, bocci ball, rooftop gardens, high speed internet, concierge, etc.).  I'm not a millennial so I don't really know what they want, but those are some guesses based on what I've already seen.  It seems people are willing to give up personal space (e.g. full kitchens) for affordable rent and some level of privacy (having a micro-apartment rather than sharing a house with 3 roommates), as long as they have access to the things they want when they want them (e.g. car2go, restaurants, etc.)  

I'd like to believe that Portlanders don't conform to cookie-cutter standards (i.e. the notion that everyone wants a nice car and a 3/2.5 home with good schools), and that getting Portland right is about knowing the different neighborhoods well and targeting a specific niche (e.g. maybe secured bike parking and a rooftop garden is more important than a garage and a yard), but we might still just be like everyone else.  (I have experienced a fair number of focus groups here where the out-of-town moderator seemed frustrated by our inconsistent feedback, FWIW.)

Ultimately, if a developer can adaptively re-use existing buildings and/or build new projects for middle income folks that prop up the surrounding community -- transit-oriented development, good grocery stores, improved infrastructure, and decent schools -- they would probably do well in outer NE or SE Portland, Aloha/Hillsboro, Troutdale, Gresham, Clackamas, and other surrounding communities.  

Welcome Sherry! I think in your case, the best advice is just to start! Finding off-market deals is somewhat of an art unto itself, unless you know the right people. You can find those types of people here on BP, but in the meantime, I suggest using the MLS and a good realtor (who has experience working with investors) to find a property that you can learn from and that might otherwise get missed by investors.

My advice would be to look for something that's close to home. Clackamas has some great schools, so if you can find something like a SFR with an ADU in a good school district and rent them out to cash flow, that would be a manageable start. In the process, you'll learn a ton and that will inform your next step with REI.

Your realtor will know what kinds of search terms to input to automate getting new listings when they pop up. When they do, I suggest acting fast. If the numbers work out (you can use this calculator to determine COCR and NOI: https://www.biggerpockets.com/buy-and-hold-calcula... ) and the images suggest that the property is in decent condition, you may even consider writing an offer before you're able to get in to see it, with something like "subject to interior inspection" on the offer somewhere (your realtor will know what to write). Normally I wouldn't recommend this strategy to someone with no experience in REI, but our market is very particular right now. (*Always do your due diligence though and get an inspection etc.).

Your job will be an asset in the beginning because it will help you get conventional financing if that's the way you want to go. I'm not accountant or lawyer, but some people will get HELOCs on their primary residence so they are able to offer all (or substantial) cash on their investment properties. That, combined with getting your offer in early, will give you a leg up with the competition. Once the deal is sealed, you can always refinance later if you want to put cash back into your HELOC.

You don't have to find The Best Deal to buy your first investment property.  While I do think this is a market ripe for growth, I wouldn't advise relying on appreciation for the numbers to make sense, however, because that's speculation.  If you find yourself in a multiple offer situation, I suggest resisting the urge to increase your offer above the amount that you initially decided made sense numerically.  If it's a property you really like (from an investment point of view), you can sweeten the deal by offering advantageous terms (e.g. quick close, all cash, offering to pay a certain amount of the difference if the appraisal comes out higher than your offer if you're using financing, etc.) instead of a higher price.  As long as you're not over-leveraged and have positive cash flow once the unit/s are rented, the experience you gain will be worth the plunge.