All Forum Posts by: Mathew Wray

@Adam Zagorsky You're right, cap rate isn't going to be a great metric for 1-4 units since they're not valued based on their NOI.

Just some food for thought:

I think you're going to be in a similar boat on many properties...it's going to be a real unique property that you can get into with a low-down, Owner-Occupied loan that has the opportunity to drive enough value to pull money out while generating enough rents to cover the new, higher loan amount. I'm not saying it can't happen, just that you'll want to look at the back end as well (what will the new loan on the higher value property and a cash-out refi cost you and will the value add rents make enough to cover that amount?) 

Have you talked to a lender yet? If not, I think that would be a great relationship to start building now if not. First, it'll help make sure you can qualify for the loan and amount you're aiming for. Secondly, you may find you don't need to show rental income for two years on your taxes to claim that as income towards future rentals. That's their world and obviously requirements are changing now so that may be in flux. 

As for your area, yeah, I'd be careful buying over there...if you're in the Linnton area then it could be okay, but I'd be careful if you're closer to the industrial area where there are some homes. I always try to think, who is your tenant going to be based on the property and the location? 

Mathew

This is good thinking and exploring options, Adam! 

So if I’m going to summarize to make sure I’ve got the scenario correct:

You can potentially buy where you currently live and with the rental income from the studio, pay the exact same amount you’re paying right now except you’ll gain the appreciation, debt pay down from the tenant, and the tax benefits? (All without having to do anything to the property) At the same time, there are opportunities in the property to add value over time and live for free in the future. 

Which side of the hill are you on in NW?

Just some questions and thoughts...

Obviously with cash flow as your goal, you’ll want to make sure you can get more, and yet I wouldn’t throw the baby out with the bath water just yet! Have you compared what else is on the market in that $480-550 price point? Will you be able to buy a property that makes more sense? Would competing in the open market get you a better result? Are there many rentals out there with similar rental income in that price range? Is buying a bigger value add opportunity (at less cost but more risk with likely less income coming in) better? Can you get favorable terms from your current landlord? 

I don’t use Cozy, but they’re based in Portland (or were before they were bought out) so you’d think they’d at least be aware of the challenges for PDX landlords. Curious to hear if they have solutions for these issues with their platform now. 

I do suspect there are lots of mom and pop landlords that are likely out of compliance, but they’re probably the same ones who aren’t using leases or have terms in them that aren’t enforceable anyway! While I don’t expect leniency from the city (I know they did a webinar training on FAIR...I can send you the handout @Amanda Hansen) I do think there’ll be a period  of time and adjustment as leases come up over the next 11 months while landlords figure out how to comply. 

There’s a Facebook group you could check out called Portland Homes for Rent (or something close-search that and it should come up) where you can post haves and needs as well. Might be a good starting point. 

I’m not trying to get involved in a transaction or step on anyone else’s toes, so I’ve got to be careful with any advice on a current transaction. So not specific to your offer (congrats on that!) but in general terms, we’re seeing lots of offers and seller counter-offers with rent back periods in them. They allow the owner to stay in the home after closing for up to 60 days, some at cost to the seller, some at cost to the buyer. 

Best of luck to you and congrats on your upcoming move! 

Morning Arta, 
Mary asked one key question that’ll help narrow down options for you. There’s a couple different ways, obviously getting recommendations is a great one: that word of mouth is how many agents build their business. Others are the BP Directory, BP Forum searches, etc.

There are some great lists of questions available to ask your agent once you’ve been referred to one to make sure you’re a good fit for each other.

Happy to help however I can!

Mathew

Morning John,

Assuming you’re looking for options beyond conventional financing?

A couple options for you-

1. Ask your agent if they know anyone looking to lend privately. 
2. Post more details on the BP marketplace to see if you can find a partner there.

3. Ask your previous lender if they have any connections to non-institutional lenders.
4. Ask the seller if they’ll consider owner-financing. 
5. Hit your network of friends, family, and service providers (your CPA or estate attorney might now folks with cash to spare looking to park it in real property during these times).

This is one of those times when having networks of people who know what you’re doing and already established is super helpful, but if you don’t have those, then now is the time to start building them! 

Mathew

Morning @Cuong Nguyen

Congrats on your upcoming closing! I see two options for you, wait or boots on the ground. If you’re worried about trust and verification, then you can wait to get started on the rehab until this Coronavirus is in the rear-view. The more reasonable solution since construction/trades are still able to work is to move forward. Utilize technology to face time or do video walkthroughs to check progress. 

I’m sure you can find reliable people now just like in any other time...in fact I’d find them the same way you found your current people. Ideally you’re using an experienced agent to help you buy, in which case they should have a large database of people who may be options and available. Same thing with your property manager, even if they aren’t able to help at the moment, they likely know folks or have clients who have been in similar situations and wouldn’t mind connecting you.

You already have bids lined up, so it seems like the only sticking point is how you’ll verify the work. Can you reach back out to the contractors you chose, explain the situation, and ask them if they’d be willing to send pictures or video every couple of days...if they won’t, then maybe they’re not the right people for you!

Mathew 

@Reggie Rearden

Morning!

Any reason you can’t take both paths? Try to fill chairs while also marketing it to other businesses as a space?

Chances are good there’ll be a lot of salons closing (not sure if you all have a shelter in place order but all of ours here are closed) and many may not reopen when the all clear is sounded so their stylists will need someplace to go! If you can’t get it full during that time then I think it’s clear it won’t work, but if you can, then it may be worth it to hang on in the meantime! 

Meanwhile, what’s stopping you from marketing the space, quietly, for rent to other businesses. Clearly your building location is attracting other tenants so put the word now. Worst case would be two good options!!

Final thought...does your wife know many other stylists? Maybe she can network and find someone to buy the business from you owner financed? Lots of stylists I know are entrepreneurial, surely there are a couple who would see opportunity in the uncertainty with us now to buy a pre-set up business with its assets and chairs in place. You get clear of the day to day, secure your income, and get to help someone out!

Best of luck!

Mathew

@Isaac B.

You’ve heard from both ends of the spectrum: the “what will it really hurt”/“is it worth the trouble and frustration in your life stressing about it” for so little difference camp (I’m in that camp) and also the camp that says “you both signed the lease, so do whatever you want as long as it’s covered under the lease” camp (who clearly don’t understand Portland rentals and aren’t going to be there to pay for the attorneys and damages you’ll owe after the fact if you try to force an issue).

If the tenant isn’t willing to sign an agreement to show and take compensation for those showings then I wouldn’t push the issue right now. Last thing you want is a pissed off tenant making showings difficult! Instead, use this as an opportunity to fight the narrative in Portland that landlords are the devil and show empathy, express understanding, and make sure she has what she needs to weather the coming weeks. Then, when you’ve given her grace, maybe she’ll be willing to walk that middle ground and FaceTime or shoot a video of the place for you so you can get idea of scope of repairs/updates needed for the vacancy turn!

Best of luck! 

Mathew

@Jessica Vollendorf

I just had the same conversation with some of my clients. While recognizing there are always exceptions and outliers, I’d assume there aren’t a ton of people looking for new rentals right now. Maybe a Portland PM has a different viewpoint? 

As things stabilize (whenever that will be...not putting dates on it because I don’t want to start an argument-but they will stabilize at some point) I think you’ll see a lot of people reevaluating where they live (and just spent weeks) so there may be a lot of movement & opportunity on the other side of this.