All Forum Posts by: Mike Nuss

@Steve B.

 I'm failing to see how your Laurelhurst example is relevant to the question at hand. When did you buy that property? How much did you pay? When you moved, how much was it worth and how much debt did you have?

If what you've  stated in  other posts is true (you don't use leverage and you invest in Oregon outside of Portland), this is a significant house sale in Laurelhurst. That probably has very little to do with the OP's current situation. The "law of diminishing returns" tells us that a big expensive home (in Laurelhurst of all places) will create less cash flow than the alternatives that you're suggesting (multiple smaller units, maximizing rent/SF). The problem is the OP doesn't  have long term ownership in a high priced, free and clear, Laurelhurst home. 

It sounds like the OP is probably in a position more similar to you, back in the day,  when you decided to keep that house and rent it. Having some equity to work with is different than having a free and clear sfr that you can trade for multiple units. I've never heard of turning your first house into a rental being called "accidental or semi-accidental landlording". Was it called that back in your day too, when you decided to keep or sell? Did you run your numbers based on rent to ARV ratio or rent to equity ratio? It seems a rent to equity ratio would be more applicable to that scenario.

Just my opinion but it seems your perspective may not match where @Tyler Hillis at in his career. 

Tyler, you have spelled out some numbers. Is that 5.5% cash on cash return based on your entire equity and investment to make rent ready? Or is it on just the cost to refi and make rent ready? Does that $172 net cash flow include fees for property management and reserves for cap ex + vacancy? If you sell, what % of your equity will you lose from the fees associated with said sale? What alternative properties are you possibly considering? 

It sounds like you really need to decide if you're willing to have "less of a home now", in exchange for building a portfolio that helps you have a "much nicer home in the future". I think many people have started building wealth by turning their first home into a rental and acquiring another personal residence. This gives you more favorable borrowing rates on those two properties, than if you should buy a new personal residence and then a new rental. Plus your mortgage may possibly be less than renting. 

I hope this helps and good luck making your decision. 

Hey @Account Closed do not include any residential uses in your exit strategy plans for an industrial zone, other than the current grandfathered use. Thinking marijuana is a excellent idea, but think manufacturing not retail. Portland has a limited amount of zoning suitable for grow spaces and building a grow facility is very low cost. In fact, if you want to assign the contract, I would consider purchasing that contract from you. When does it expire?

@Jeff Wright appraising is an excellent skill to have in this industry. Although, I have to admit, it takes a little while to get past the appraiser brain. In my early days, a good deal to my appraiser brain, didn't make sense to the investment criteria. That may not be a problem in this market, but I found it to be an interesting struggle early on. However, you will have many advantages over your competitors with the appraisal experience you have. 

Good luck!!

@Brian Knier and @Aimee Knier hows it going with your purchase opportunity? Is the seller feeling tough or are they working with you. 

My two cents on this dilemma, is "it totally depends". The problem with working with agents is that you can't see, hear and feel what the seller is saying and going through. You don't get any reaction, it's like throwing darts at a board blind folded. I have a neighbor next to me that is at the top of the market, has some unreasonable demands and simply continues to go through back up offer after back up offer. Eventually someone will get them when they're willing to come to reality. Some sellers are expecting to make concessions, like in Dani's case, where she gave them a reasonable proposition that worked for everyone. Ya never know, you just have to do with what you're comfortable with and go from there. 

@Account Closed I'm buying you lunch and we will talk. I know our millennial tenants would love solar (and a/c for that matter) and I think there is potential to get higher net income out of the properties we invest in using solar. Thanks a ton for the insight. Where's your favorite spot?

Hey @Steve B. we agree on something!! You’re right, our legislation is showing no sign of changing directions anytime soon, and it seems Multnomah county gets more liberal by the year.

I’m sorry but you’re way off here…”the Max line is a minor player in housing outside of low-income rentals”. I'm too lazy to go dig up the multiple economic papers I’ve read on the topic (backed up with my own experiences, research and eyes in the marketplace), but there has been an economic boom along the MAX lines. I guarantee you there are thousands of property owners, including me, benefiting from the infrastructure that the city of Portland built. We will continue to benefit from the demand that’s been created, in large part because of the MAX.

I agree that the MAX is a tough pill to swallow for taxpayers that, A) don’t use it and B) don’t own a business or property around it, as these taxpayers are subsidizing every ride in a heavy manner. The bottom line is that it spurs private development, which drives the economy. Same thing with the Tram. There is no way OHSU invests in the south waterfront, the way they do, without the tram in place. It just isn’t feasible. That one huge piece of legislation completely changed the landscape of that area, in large part due to their pact with OHSU, whether we like it or not. Good luck telling anyone in the SWF that public infrastructure doesn’t help their property value. Even the tax payers that don’t benefit from, but subsidize the max, see a rising tide that they take part in. It’s very hard to argue, without simply whining, that the MAX and Streetcar haven’t benefited their market segments.

Also Steve, You obviously don’t know much about me. I’m on record in both January 2015 and January 2016 as stating Portland won’t continue to appreciate at the rates we’ve seen and I’ve also stated that I’m looking forward to another downturn. I believe the midterm is where Portland is the weakest. Portland looks great in the short term and great in the long term, but affordability is changing (still more affordable than 2006-2007 levels) and lending parameters are starting to loosen. We won’t have a crash like we did in previous years, there has been too much “skin in the game”over the past 4-5 year run up, but lenders are heading back to pre crash standards and something has to be done about the conglomerate GSEs known as Freddie and Fannie. There will be a changing tide in borrowing power, which will affect the market place. People won’t have to sell like they did during the crash. But eventually these prices will bring more significant amounts of sellers to the marketplace. Those sellers combined with the extensive amount of development in the pipeline, while force market conditions to change from a seller’s market to a buyer’s market. I think it will be smart to avoid selling and to be buying aggressively 2-5 years from now.

@Mushfiq S. , to answer your question. Gresham is an interesting market. It has a lot of potential as Gresham, Fairview, East County and Troutdale have a significant portion of Portland’s very minimal industrial land (this is where Seattle puts Portland to shame by the way, feasible industrial land). There are many main thoroughfares to get out there (Powell, Division, Stark, Burnside, Glisan, I-84 and Sandy) and there is a MAX station in downtown Gresham. I know new construction is doing well and they’re seeing escalation in the market place. Gresham recently was reported to have 1% vacancy rates, lowest in the State of Oregon at the time. The downside, or potential downside to Gresham, is that Portland’s gentrification is pushing low income earners toward Gresham. That’s part of the reason their vacancy rates are low. In a market like this that just increases demand so high at the lower price points that it trickles upward from there. When supply levels switch it can be bad, because lower earners, will have more pull in the market place. But there have been multiple institutional investments made in the Gresham area and it has strong demographics, in the long run, just like most of Portland at this time. 

@Jay Hinrichs yep, the past 3 debacles of the UGB move have been a joke. Damascus, being the biggest. Even Cooper Mountain, where they have some infrastructure and major need for expansion, just lead to battles between Wash Co, Beaverton, Tigard and King City about who will do what and who will get what. That high school is going to be pretty darn sweet though. 

South Hillsboro expansion was the dumbest move ever. Super dumb. You have Intel real close to Hwy 26 and some large industrial projects underway right next door, but you're bringing housing in all the way across town, further from the max and further from Hwy 26. 

As dumb as Portland can be, at least we don't have to deal with this headache. We just market proximity to our highly subsidized max line and renters come flocking. I'll take that over the burbs anyday.  

@Steve Moody and @Jay Hinrichs This is one of the reasons Portland is forecasted to take on most of the next 1million residents. Portland is the sole city that has the ability to provide the transportation amenities that high density requires. Our suburban cities can have the urban amenities that Portland does, but they will never have the infrastructure that Portland has, at-least not in our lifetime. They're too far behind and too less committed than Portland.

South Metro will eventually be the benefit of a rapid mass transit line, or Max, which benefits Tualatin and Wilsonville (speak of a highway clog, sheesh). SE Powell or Division should eventually get rapid transit service, which would benefit Gresham. 

The loser in all of this, in my opinion, is Beaverton and Hillsboro. They have 2 of the largest employers in the state and only one measly little public transportation line feeding the entire west side. ODOT at it's finest. Ignore the higher demand less serviced areas. Makes sense to me. 

@Jay Hinrichs, @Neal Collins and @Account Closed

In my opinion, the UGB doesn't effect housing in Portland anymore. The urban core demand is so strong that activity around the UGB equates to less than a ripple, by the time it would effect inner Portland. The UGB moves so slowly and land development takes so long that Portland's urban core is not effected by a move in the UGB. Now, the suburban markets are different, because they can be directly affected and need the added supply that UGB can ultimately create (however long that may be). Portland will be getting it's new supply on land already inside the UGB and that won't change anytime soon. 

@Derrick Aragon sprinklers will be required on the new unit only (most of the time). No sprinklers will be required for the existing building, unless your windows won't work for fire seperation standards, at which point a "sprinkled area" on the original structure may be required. We have this in play now on one of our multi family properties. The new structure will be close enough to an attached deck, that we will have to sprinkle the attached deck (has contiguous roofing), but not the rest of the existing structure. 

@Account Closed the thing to remember about commercial versus residential is that banks and the building code are different. Banks are 5+ units = commercial. The building code is 3+ units = commercial. Small difference in perspective, but major differences in the physical building and planning of projects.