Home Buying in 97211>Question Details

Kevin, Both Buyer and Seller in Portland, OR

Is it a bad idea to buy a house, possibly to become an investment property, when possibly moving in 2 years?

Asked by Kevin, Portland, OR Wed May 13, 2009

Myself and my fianceé are considering buying a house in the Portland area but are hesitant because we are seriously considering moving on to somewhere else after she finishes chiropractic school in 2 years. Would this be a better idea if we buy a property, possibly multifamily, that we can rent from afar? Or is that a recipe for likely risk and headache? Are there any situations where this is a workable plan?

Help the community by answering this question:

Answers

9
Hi Kevin, right now we are in a buyers market. You can get great properties at prices comparable to 2003 or earlier and rates will never be better. But the investment question is a really good one. How do you make it work with safety? All investments have risks, so you must do your homework.

Buying right is the first place you make your money in real estate, the second place is cosmetic improvements that cost less than 10% of the purchase price, so 200 thousand dollar property you would try to limit the improvements to 20 thousand or less. The third place you make you money is killing the debt....amortization or the reduction of principle over time. And lastly you make money with appreciation.

Here is the rub, most people look at appreciation as the main way to make money but that is the last way you make money and that's the bonus money.

I manage lots of propertes in the greater Portland area and I see investors working very hard to buy right and they are buying. So the next question is do you have a substantial down payment to invest and is it enough to make your investment cash flow. One thing I see people have success with is buying a duplex and living in one side and renting the other for the first 2 years and then renting the second side. They have someone else paying down the mortgage to reduce the principle on the loan. To do this you might consider building a team from Realtor to lender to service providers like CPAs and contractors. Good luck in your future investment.
0 votes Thank Flag Link Wed Aug 18, 2010
Hey Kevin,

I use to live in Portland and have a rental. Your post was a few months ago, not sure if your still thinking about it, but would be happy to answer any questions you might have. If you post a response, it will email me and I'll come back to this forum and answer. Good luck!

-Mike
0 votes Thank Flag Link Mon Oct 12, 2009
K: this is a tough one and far be it for me to try to dissuade someone from purchasing real estate! Especially with interest rates being SO low (they dropped again yesterday, haven't checked today) and if you qualify for the 1st-time buyer program what an excellent opportunity for "free money" (plus, increased inventory and low, low pricing)! However, because I own investment properties I think there are many considerations here. You would need to run the numbers and make sure that your rents would cover a majority of your costs. The rental market is good now, but it's hard to predict what rental rates will be in a couple of years! Traditionally rents go up and I always love the idea of someone paying my mortgage costs!! Handling rentals from afar would absolutely require a local property management. I had two rentals in Bend for awhile and even that distance was difficult to manage from afar. So, you have to factor into your calculations the approximate 8% monthly (+ or -) for management fees. On the positive side, you could possibly get into this home/future investment for as low as 3.5% down with FHA financing, live and enjoy the tax benefits for two years and rent the property while leveraging someone else's money! When considering these more complex purchases with clients, we sit down and brainstorm on a checklist of considerations, as there is no "pat" answer....jj
Janeese Jackson, Principal Broker
"your" Real Estate Resource
530-709-0802
jj@janeesejackson.com
0 votes Thank Flag Link Thu May 14, 2009
Kevin, Since I believe we are at or near the bottom of the real estate mess we've been all experiencing(especially if I judge by this week's activity for myself!) - now is a great time to buy a home/property. It sounds like you may qualify for the $8000 tax credit program as well. If and when you decide to move out of the Portland area - I would suggest hiring a property management company to manage your property. Yes - this will cost you a percentage of the property income - but, it's worth it for peace of mind from afar!
0 votes Thank Flag Link Thu May 14, 2009
Hello Kevin,

Property ownership has historically been supported by benefit to the homeowner through our tax system so I agree with Dune that you will come out ahead if you buy. If you are a first time homebuyer, and you buy this year, you will be able to take advantage of the tax credit...basically free money for you if you close before December 1 2009. After 2 years, you can turn your home into an investment property (which is already is) and rent it out. Any "headaches" that come along with being a landlord can be mitigated by hiring a property manager, or by just doing careful screening of your renter and being very specific about your expectations. The type of property you buy, be it mulit family or single family, will depend on your borrowing ability, your financial situation, and carefully constructing a plan that works for you. Be sure you record all of your projected expenses, a realistic potential income and analyze your potential benefit as part of building your plan as you look at potential property to buy. This is a great time to buy real estate because of the amount of inventory and the low interest rates, but only if it works for you in a well thought out plan for your specific situation.

I hope this is helpful!
Karla Divine, Broker
Divine NW Realty
503-819-6923
0 votes Thank Flag Link Thu May 14, 2009
Hi Kevin,
That's a tough one... This is my advice: Buy something at a steep discount... If you find a deal, then it would be way worth it. A foreclosure can be bought at 25% or more under market. You can check out deals on PortlandHomeAuction.com. There is an "auction alert" that will instantly send you any new deals.

Good Luck!
0 votes Thank Flag Link Thu May 14, 2009
Kevin, I hope you don't mind a non-pro opinion. If you were to concentrate on location and committed to doing a lot of painting, yard/lot improvement ect. yourselves keeping the costs down you could make it work for you IMHO. If you also keep track of all the Tax incentives concerning home improvement after a couple of years you may be able to 1. Rent it for enough over your payments to make it profitable or at the very least pay for itself until the market goes up enough to decide to keep or sell.
2. Sell it for enough to break even and have a Few Thousand to take with you, either way you end up living rent free for two years.

It would all depend IMO on getting something in a consistently desirable area to live/rent at a Price low enough that the Average Rent is higher than your payments.

Dunes
0 votes Thank Flag Link Thu May 14, 2009
Kevin it is always better to buy a place and turn it in to a rental than buying a rental because of the extra down payment of non owner occupied loans and higher interest rates. Make sure all your costs, insurance, PITI, exterior maintenance and interior updates are covered in you payments so you don't have negative cash flow which will hurt you when you buy your next place. The bank looking at debt will take at least a 5-8% vacancy rate in the gross income so you still might have negative cast flow. I would look at newer and maintenance of the property since the up keep can really be expensive but newer you will not have to paint for 3-5 years or replae carpet or roof. You should get a 1 year lease and maybe say the property management fee but it something goes wrong who does the renter call? With multi family you just have the same issues but doubled can you afford to have any vacant and for how long? After you move and rent it out you should also talk to an accountant to see what tax advantages you have when you convert a residence to a rental befroe doing this? Good luck.

Tom Inglesby,Broker
RE/MAX Equity Group Inc
ABR,CRS, EA S.T.A.R eco-broker
503-319-9035
0 votes Thank Flag Link Wed May 13, 2009
It is workable if you plan accordingly.

The best case scenario for a rental property would be to purchase a place that you will be able to rent for the PITI, utilities, and property manager fees. The other piece to consider is whether or not you will have access to reserves for needed repairs and periods of vacancy. You can claim some of the rent you'll receive as income to help you qualify for another loan if you'd like to purchase in your new town as well. Income to debt ratios will apply so you may want to look at that, as welI, if you are wanting to purchase another home in the city you may move to.

It is definitely worth looking into and penciling out on paper! Way to have an entrepreneurial spirit!
Web Reference: http://www.katiecox.net
0 votes Thank Flag Link Wed May 13, 2009
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer