All Forum Posts by: Mike Nuss

@Mike Biewer you have a pretty common termination clause for our market area. It gives you the "option" to do quite a few things, 1.5 month's rent of fees is one option. However, you get the choice to hold them to the lease or let them off light, it's your prerogative. 

@Shaun Dewitt the easiest way for you to do this, if it works for your parents, is to purchase the home from them as an installment sale. That's a quick answer. There are many ways to structure the rest of the transaction saround that.  However there are many factors to think of that will dictate how you should "structure around that". 

Do you plan on living there two more years? Are you going to move out during the renovation? There are tax ramifications for both you and your parents. Its unfortunate you didn't start an installment sale 3 years ago. That would've lowered your parents cap gains and you would already have seasoning for an owner exemption on the 100k gains you hope to make. However, you can still set this up now to minimize your tax exposure and still provide your parents a good income stream for retirement. 

@Matt Garboden yes I do believe it will slow down development. $600/lineal foot is a big deal. That's 30k for most infill lots. Builders are making good $ but a 33% or more profit cut will slow development down. 

@Account Closed....LTIC will actually enourage duplexes rather than sfr. So for some sites it may "increase density", but as a whole, it will decrease supply because some developable lots will just not be developed. 

@Account Closed this is exactly where the HBA comes into play. I know your pain. I had to meet with a seller of two lots yesterday. PBOT has absolutely no improvements requirements for these two lots, but LTIC is going to cost 60K anyway. That absolutely has to be absorbed by the seller in order for our transaction to make sense. We were in agreement 6/29/16, LTIC was initiated 7/1/16. That hurt!!!

We are building a huge spec home in SW, a lot we purchased from the same seller, good thing we applied for permits prior to LTIC or it would've been the same exact problem. No PBOT requirements at all (both are dead end roads), but there would've been a 60K fee justs because PBOT has done what the government does......which is mis manage funds. 

It's a terrible program, is terrible for roads that wouldn't need improvements, but great for properties that would've required 1/2 street imps (as LTIC would be cheaper). It's one of the worst thought out programs that PBOT has come up with to date. And it's the 3rd such program since 2012, once they realized they need $100,000,000 to finish their road improvements to Portland. 

@Dustin Mellor the actual city context matters as well. For example, Canby or Molalla, versus Mulino. Is this park a larger part of a community redevelopment project (ie Canby) that will be a piece of overall demand surge in the area. Or is this just a rural field trying to give a few amenities to a rural community. 

The context of location will have an affect on if it actually increases demand or not. If this is an overall demand increaser, you should see value come with it. If this is just an outlying project that doesn't create a quantifiable amount of demand, there may not be a value increase. 

I side with @Chris Parrish, living across from a park is a desirable amenity for families who would use it. The new park in Cully is a great example of that potential value add (although it's tough to tell if the park increased demand as demand increased anyway because of it's location in Portland). 

This is a good thread. I like the real world examples. Multiple perspectives help give some actual insight to the current market. 

I think the main reason many people complain that Portland prices are so high, is because they don't really understand what rents can be in the Portland market (with the right A class assets). High end units can rent for $3,000 per month, on a long term basis, to amazing tenants with 700+ credit scores. They rarely bother you and are no where near "one flat tire away from missed rent".  

@Demjan Van Der Kach you have a ton of options in the Portland market. $500K with 20% down can get you a good long term investment in almost every market in Portland. 

However, what I don't think has been pointed out is that your exit strategy really is a "flip" and I haven't heard anything about equity. Please excuse me if this comes out wrong, but this seems like pre crash activity to me. Leveraging a "rental" for 12 months (I'm assuming to avoid short term capital gains) and banking on appreciation, while buying retail is super risky. 

Anything less than 6% appreciation will most likely result in a loss. Selling has costs which some people misunderstand. Those can/will offset an appreciating market, so you need to be buying with a discount to make this strategy successful. That's difficult to do in Portland without a lot of action and/or intimate knowledge of submarkets. Working with an agent on RMLS, without having a rehab budget in mind (to force appreciation), could bring even more risk to what could be a less than stellar acquisition. 

I understand the 400K of leverage in the equation could result in a nice little return on your 100K with just a few points of net appreciation, it's just risky in my opinion. You can easily over pay, can easily see a slight shift in the market and concessions become a norm, you can see less than 6% appreciation, your tenant could trash the building, not pay rent, refuse to leave, etc..

If a 12 month resale truly is your exit strategy, there are probably a lot of lower risk ways to invest, that would result in better cash on cash return and less hassle. 

@Dustin Mellor sellers can actually have great control over property after selling, through what's called a "deed restriction", as long as the restriction is legal (doesn't discriminate, etc.) A property can be greatly limited. Height restrictions when selling lots are common as are anti demo restrictions on historic homes. 

Banks often put 90 day resale restrictions on short sales in the Portland area. 

Bummer, I'll be in Rwanda for this one. Have fun!!!

Stefan, Kyle Pearson at Pearson Advisory is an excellent CPA for what you're looking to do. 

http://pearson-advisory.com/

Good luck!!