All Forum Posts by: Melissa Hartvigsen

Please do not follow @ Melanie P.'s advice here! The Oregon rules are extremely strict. If you falsely tell the tenant you are moving in a family member, and then list the property for sale you could be subject to owing the tenant 3 times your rent amount, plus legal fees and damages. Ref. ORS Ch 90.427.

For your 1st question: 1) Willing to offer a financial incentive for them to leave. I'm
thinking of $1500/ (property rented for $2800/). Is this too much or reasonable?  Too little!

If you want to buy them out of their lease early, I strongly encourage you to engage an attorney.  Also consider that the entire state has a relocation fee = 1 month rent, if the tenant has resided for more than 12 months and you have 5 or more properties (including your personal residence, and any property owned outside of Oregon as well). Even if you don't own that many properties, most tenants know this and would expect your offer to be at least their rent amount or more.  I have seen "cash for keys" deals end up being above $10,000.

Otherwise, wait until it is closer to the lease ending date and issue the no cause since they have occupied less than 12 months. Bethany is in Washington county and follows the state
rules. Minimum of 30 day notice issued prior to lease end date (make sure to account for mailing time and add 4 days) If the current terms ends on 8.31.2024 for example, you would want to deliver the notice no later than July 29, 2024.

For your second question: 2) If they decide to take the offer and move out in April, does that override the 90 day notice needed (see below)? 90-day is not applicable in a cash for keys agreement. Both parties are choosing to accept terms other than what is specified by landlord/tenant law. You can mutually agree upon any move out period. In my experience I have seen that range from 30-60 days (could be more, could be less). It really depends on how quickly the tenant can secure a new home.

Best wishes,
Melissa

Hello @Rachel H.,

In Oregon the rules are not in your favor. This is no exemption based on the number of rental units you own. You can only deny a request for an emotional support animal for a few reasons:

1. It poses a serious risk to your property or other tenants. For example, if you check a rental reference and the previous landlord says the ESA (dog) bit another tenant, then you can deny the request.

2. It would cause an undue burden (financial). If accommodating the request required an expensive alteration, you could deny the request.

3. It would cause an undue burden (affecting operations). Example, if you had shared furnace ducting in your rental and your existing tenant in the main house has severe pet allergies, and allowing a ESA for a new tenant would cause issues for the current tenant, you could deny the request.

You can always call the Fair Housing Council of Oregon Hotline, 503-223-8197 Ext. 2 and ask for their guidance. (They are ultimately the ones who enforce these rules along with BOLI). 

If you accept the tenant, and the emotional support animal causes noise disturbances then you would address this with a lease violation. Think of it like a loud party.

Good luck,

Melissa

Hi @Adam Davis,

While you may not qualify for a conventional loan, there are non-qm loan options that can go off of your bank statements and credit score without having to verify your tax returns.

Your thought of getting the loan and only paying when the house sells is not an option. Hard money lenders will either lend up to 85% on the loan to cost (acquisition and rehab), or 70% of the ARV (after repair value). They will always go off the lower number, and you will need to bring a down payment and closing costs (the standard title and insurance fees for escrow, as well as document and origination fees). Then you will be making monthly payments on the interest amount (currently I have seen that in the 11-12% range). With these carrying costs most people are looking to exit the hard money loan in 6 months or less.

There are hard money lenders that will work with first time flippers, and if you need some recommendations send me a private message.

Cheers,

Melissa

Hi Hayden,

Our local REIA does a "Deal Deep Dive" once a month and while it isn't visiting a property in person, they are good at walking you through the math. Each month there are new examples, so one time it could be for a flip and another time it could be how to wholesale a deal.

The next one is virtual and is on Thursday, February 8, 2024 from 7:00 PM - 8:00 PM. Here is the calendar link if you want to sign up:  https://www.orreia.net/Calendar.aspx

Cheers,

Melissa

Hello @John Chapman,

I can recommend @Cari Sweet. She manages properties for a couple of my real estate clients. She is one of the few who is really in tune with all of the Portland specific rental rules. She is the owner/property manager for 

Peace By Lease LLC

(503) 708-7907
[email protected]

https://www.peacebylease.com
6501 S Macadam Ave Ste A, Portland, OR 97239

Cheers,

Melissa

Hello @Bradley McVay

Congratulations on your graduation, and your upcoming engagement! 😊

BP is a great place to learn, and in addition to all the things you mentioned, I would suggest getting comfortable with the calculators (found under “tools”). You should evaluate several properties that interest you, (for practice to start). The calculator results will help inform your decision on which path will make the most sense for you.

I built my portfolio by house-hacking in the Portland Metro, first with condos that I later traded into larger properties after holding onto them for several years. I still house hack at my primary residence by renting out part of it to travel nurses. Many clients have pivoted to buying single family homes or condos and renting them for market rent when they leave due to the local price point and currently high interest rates.

Holding and trading up later will likely be the strategy you take because of how the interest rates impact your monthly payments. Substantially increasing your down payment will not have a large impact on your payments, so I would focus on the lowest price point you can.

For example, if you purchase a single-family home in Portland using a 3 beds 2 bath house currently on the market: https://redf.in/wpES9K

$425,000 price, $42,500 down payment and at 7.5% interest your payments would be appx $3,325 including principal, taxes, insurance, and mortgage insurance. Changing your down payment to $60,000 only saves $135 a month. The challenge is that you can rent an equivalent house for about $2,500 a month as a long-term rental. You may be able to get about $3,000 a month renting room-by-room. You would hold for a while, before rents catch up, or if rates go down for a refinance. This is where the BP calculator comes in handy for you to see what the return looks like if you hold this house for 25 or 30 years.

Stepping up in price to a 3 bed 3 bath house; https://redf.in/1OxC2K:
$565,000 price with $60,000 down payment at 7.5% interest your payments would be appx $4,615 a month including principal, taxes, insurance, and mortgage insurance.

Regarding buying a multifamily and raising rents: In our market that presents many challenges.
1. Our statewide rent cap would prevent you from raising rent more than 10% in a single year for any existing tenant.
2. There are only 4 legal reasons you can have a tenant move out. You or a family member are moving in, the unit will be converted to something other than a rental, you are doing a substantial renovation, or you are selling the property and a buyer who is going to owner occupy is going to move in (SFR only you cannot do this on multifamily). If you have the tenant move out so that you can renovate and charge more rent to the next tenant, you may have to pay a relocation fee. (Portland does not matter how many units you own, there is no exception to this, and it ranges from $2,400 to $4,500 depending on the number of bedrooms in the unit. The rest of the state the relocation fee is equal to one months rent if you own 5 or more properties).
3. Most of the multifamily units I see in our market have rents grossly below market, and lots of deferred maintenance that the current seller has not factored into their pricing.

For your “live in-flip”, find a realtor who does a lot of volume locally. They can help you estimate some of your repair costs. For example, if it is a small townhouse, I can tell you from experience the going rate for a new 30-year roof if $8,000 to $9,000, and a roof on a medium sized house is $12,000 to $13,000. If something doesn’t need a new roof, cleaning the roof and gutters is about $280 to $300. During your inspection period you can bring in contractors to get estimates to help you figure this out as well, good realtors have referrals to cover most jobs.

Other considerations for this option include:

With your plan to force appreciation, you may want to talk with a lender about a rehab loan option. That way you can keep some of your money in your pocket and finance the work that needs to be done.

I would also look at the cost of pulling money out, a HELOC rate right now is somewhere between 9-10% and the pay back period is usually 10-15 years.

These are all just starting points. I am happy to continue the conversation if you have more questions.

Cheers,

Melissa

Quote from @Isaac Sanchez:

Quote from @Melissa Hartvigsen:

Quote from @Sophia N.:

Hi, I am considering investing in section 8 as a LL catering to tenants with vouchers and want to know the pros and cons. It seems like a great opportunity to make high returns with limited risk, but there has to be a caveat. If it was so great, why hasn't everyone been doing it for the past 25 years?  

Hello @SofiaN,

Administration of Section 8 rent payments will be handled by your local Housing Authority. The local authority website should have a tab for landlords that will give you general information about how to participate in the program.  

The Housing Authority will review the household makeup (I.e family size) and income. Typically, the tenant will have a voucher for a specific home size. It’s important for you to confirm that the voucher matches your rental size. For example, if you have a single tenant and he/she has a voucher for a studio or one bedroom, but applies for your three bedroom house, the Housing Authority will not pay you. The Housing Authority also sets a maximum amount that they will pay based on unit size. You need to confirm the amount with the Housing Authority because it does not typically state the dollar amount on the voucher.

The pro is that you have steady guaranteed income, assuming that the voucher covers 100% of the rent. In most cases, a voucher covers a portion of the rent, and the tenant is responsible for the remaining balance.

Another pro is that section 8 tenants stay longer at their rental than other tenants so you will have less turn over.

Cons: there is more paperwork involved. When you accept a section 8 tenant and you approve an application for rental, you must submit an inspection request to your local Housing Authority. They must approve the habitability of your rental before payments start.

During the tenancy, section 8 also conducts annual inspections to make sure that habitability is maintained.  

Any communication you have with the tenant that includes notices of violation, rent increases, etc. must also be provided to the Housing Authority.

I am no longer in property management, but had a 10 year career where I managed 300 units and 25% of the tenants received section 8 assistance.  In my experience I received more late payments, and more maintenance requests caused by damage and neglect from tenants receiving section 8 assistance than I did from tenants who did not receive the assistance.

Cheers,

Melissa 

Good info Melissa! 

Do landlords receive payments directly from the housing authority? Or does the section 8 tenant receive the voucher amount and make the payment to the landlord?

The housing authority will pay the landlord their portion directly (mailed check, or you can sign up for ach deposit).  If the tenant has a portion of the rent, then it will come from the tenant.

Hello @Mark Garcia,

For an owner occupied residence, the lender is going to require that you show enough steady income to repay the mortgage. If it is a w2 job, the general rule is that they require two years on the job. That doesn't sound like your situation. Maybe they can count some income from your t-bills? This is a question for your loan officer. 

If your investment income isn't enough to qualify you for the loan, my first thought would be to find a close friend or family member with steady income that you can ask to co-sign.

Did the loan officer you spoke to offer tips and a realistic timeline on how to get to your goal? If the answer is no, I would look for a different loan officer.

Good luck,

Melissa

Hello @Andrew Rellinger,

In Oregon, if the seller hasn't completed the work the time the buyer's review period ends there would be a couple of reasonable options (please check with your realtor on the remedies available in your state):

1. Both parties agree on a new date for the work to be completed, check the permits, and have the buyer review completed. Your realtor should be able to help you with an addendum for this.
2. You the buyer can terminate, and receive their earnest money deposit back since the seller would be in non-compliance of the contract for not getting the work done.
3. (I don't advise this), just accept it as is and take on the mold remediation after closing.

Additional concessions: Check with your lender. There is likely a maximum seller credit that you can ask for in a deal. If you are already at the maximum credit, then see about an escrow holdback for having the work done after closing. (This is something that will require an addendum, a specific contractor that has agreed to do the work, and involvement from the title company since they would be releasing funds for the repairs).

Contact your local municipality and talk to their building service department to find out the best way to verify a permit in your local area.

Best wishes,
Melissa

Hello @Todd Wood,

Here's my take on your choices:

Option 1. Keep the property, and have your attorney help you negotiate a cash for keys agreement to get the tenant out. Then, you can get more money in rent. (Market rent, even in the lowest rent neighborhoods in Portland for a 3bed 1 bath SFR is at minimum $1900.  Your current rent of $1,380 is well below market, and with our rent cap, it will take you years to get even close to market. The going rate for a property manager is 8-10%, though I have seen it as high as 14% in the City of Portland due to the extra layers required for managing a property.)  Even if you come in with $5,000 out of pocket that would take you 10 months to break-even if you continue managing or about 15 months (if you pay a PM 10% a month).  This option removes the "headache" of you dealing with the day to day operations and keeps the property in Portland. 

Option 2, sell and buy in another market. If you are financing the deal it would be hard to make anything pencil with the appx 9-10% interest rates for investors. Make a forum post in BP to ask for recommendations on markets and do some research.

Option 3, consider using a 1031 exchange and acquiring a DST (Delaware Statutory Trust). This will allow you to keep the cash flow coming in, and remove the day to day operations of managing the property. Forbes has a good article on these: https://www.forbes.com/sites/forbesfinancecouncil/2023/08/22/understanding-the-delaware-statutory-trust-full-cycle-event/?sh=4a52b0641236

Option 4, as you stated, you can just sell and take the tax hit. You would still have money in your pocket to invest elsewhere.

Personally I use on calculators to see the "financial opportunity" before I make a decision. BP has a rental property evaluation calculator under tools. If you are considering non-real estate options you could try the "investment calculator" on calculator.net.

Best of luck to you!
Melissa