All Forum Posts by: Jeremiah B.

Hey Jeff S.

Indeed it is. I'm from the Seattle area and looked briefly at Seattle to purchase a rental - but was blown away by the cost. Depending on the area, I would estimate Seattle to be 20-30% more expensive than Portland (and 20-30% less cool I might add... )

:)

I'm a lowly minnow investor, but Q1 has not been a great start.

We had a modest goal of $3k positive cash flow in 2013 from our 2 SFR rentals, but that is already a bust due to a PM messing up a lease. We should still have a positive cash flow this year, which would be a first, but it will not be what we were shooting for.

We had planned to have our first out-of-state investment lined up by December. We had targeted Atlanta which looked fantastic at first blush - but our more in-depth research has been concerning. Increasing prices, decreasing rents, increasing vacancy rates, and increased investors (including hoards of out-of-staters and the dreaded hedge funds) have really given us a moment of pause. However, Atlanta was the only city to meet our initial priority list, so our out-of-state plan is currently a big question mark.

Outside of REI, life is fantastic with a wonderful family including a new addition from February! But within REI - we are already behind track for this year.

Lori Walker Welcome fellow Portlander!

Naga A. That's good to hear on all accounts. And I was figuring the same thing about me having legal recourse. Thx for the insight!

Steve Babiak That makes sense. I hadn't considered an addendum. Would the tenant need to sign it?

Jon P. Kind of. The contract between us and the PM specified that they would be our PM for 6 months. This was independent of the property being leased.

MIKE PURCELL Good stuff. I will send you a PM as Id' like to get a little more information.

I've found myself in a pickle that I hoping for some guidance on. The long-and-short of it is that we own a property that was recently leased, using a property manager. At this point, we would like to change property managers one month into a 12 month lease, but I'm not sure if I can do so, or how difficult it might be.

As some context, we 6 months ago we purchased a rental property in Portland and decided to try a new (low cost!!!) PM. Getting the place rented was nothing but problems, including many issues that the PM could have managed (poor pictures, incomplete sourcing, very very very few showings, etc.).

When we agreed to try the PM, our contract specified that we would stay with them for 6 months or pay a fee. So, while we seriously considered leaving them 2 months ago, we decided to go another route and aggressively cut the price in exchange for a short-term lease. This would get us out from all contracts/leases in the summer, at a time that we are not 8 months pregnant.

To do this, we cut the price to ~25% below market and explicitly (by email, verified by PM) asked for a 6 month lease. All parties seemed to agree. However, the lease that was presented to the tenant and is now signed is for 12 months.

This is a big deal to us - both for the cost issues (~$250/month in lost rent for 6 months, coming vacant at a bad time, etc.) and trust issues (I don't want a PM that can't create a contract at my instruction, they did a poor job getting it rented, etc.).

We plan to cut ties with the PM. If needed, I feel that we can show a material breech of the contract, though I think that I have annoyed them as well, so I hope that we could find a mutual agreement without demonstrating a formal "breech."

With that said, I've reviewed the lease and that document does not have any statements about changing PM. In fact, the document clearly states that the agreement is between the tenant and the PM, and that tenant owes the PM directly the rents due. Frankly, the tenant has not acknowledged that the PM has the authority to change the administrator of the lease...

Our contract with the PM is also fairly silent on the topic. It does specify that the PM must notify the tenant of the term within 30 days.

My hunch is that the lease is set-in-stone, and barring agreement from the tenant can not be modified to a 6 month lease. But I'm wondering how changing PMs mid-lease works. Will another PM be able to administer the lease? How high is the risk of rents being sent to the wrong person? How disruptive is this for the tenant? Do I have legal recourse to rectify lost rents?

As an aside, the wife and I are 8+ months pregnant, so we do not plan to learn new skills, and hope t avoid getting into a sticky/involved legal battle right now.

What do you think? I welcome any thoughts or advise that you might have.

I use and value a pm, but I do so because I dont want to control or manage the property. If you want that control but your big concern is midnight calls, I would seriously think about not hiring a pm. My understanding is that those calls are very rare.

If you have a good mortgage or escrow person, ask them. They work with a lot of sgents and sre happy to help. Heck, even if you dont, it may still work.

In my experience, a decent mortgage person has good relarionships with good agents.

Cash flow in Portland is easy... it's just also negative... There seem to be a lot of markets that would struggle to generate a long-term positive cash flow using a SFR as a rental. There are more extreme examples than Portland, but Portland is probably on the list.

But even if I could, I would consider investing out-of-state just for the sake of diversification. Rentals constitute a large portion of our retirement plan, meaning having all of our rentals in one markets puts our retirement disproportionately at risk.

Great topic!

I'm making plans for my first out-of-state investment, and gave this topic a lot of thought - both in selecting an area and the niche within that area. For me:

The house we're looking for:
1. Ready to be rented/Turnkey. Finishes don't have to be strong, but the place needs to be rentable from day 1.
2. 3 bed, 2+ bath SFR. Slightly larger also works.
3. Newer homes. Probably newer than 1990, but the newer the better.
4. Decent lot size/basic landscaping.
5. Suburban feel. Sidewalks, and tree lines streets are big deals for us.
6. We target higher-than-average rental units (60th percentile?), and are willing to pay a little more upfront and sacrifice some cash flow to do so.
7. Lots of house for the money. Certainty <$100/sqr foot. This rules out most of the US...

The city that we're looking for:
8. In a city/metro area that is larger than Portland. I think this rules out Austin.
9. A good cash flow on the type of SFR described above. Though this is a long-term investment, so cash flow is not the sole-priority.
10. A decent long-term outlook for their economy. This rules out Detroit and Vegas (this is highly debatable, and I recognize that).
11. A non-extreme climate. This rules out Phoenix.
12. A rental market that isn't saturated.
13. Taxes and Rental/Tenant laws that are not prohibitive.

Within the market:
14. Above average rental in a B+/A- area. Rental amount probably around the 55th percentile for SRF Rental.
15. Accessible to the downtown economy.
16. Not overrun with vacant houses or rentals.

For me, this was Atlanta... a market that I'm actively trying to break into.

Travis Daggett

Welcome to BP!

Do you do any work further north in the Portland area?