Home Buying in Portland>Question Details

Angie, Home Buyer in Portland, OR

Where's the best areas of town to buy an investment property?

Asked by Angie, Portland, OR Thu Dec 6, 2007

Would be a property that we'd rent - and possibly look to make some equity on remodeling before selling.

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Well, I think it's important to note that different areas of Portland perform quite differently from each other. Here is the appreciation data from last month on specific areas (October 2006 - October 2007, from RMLS data).

N Portland: 8.5%
NE Portland: 5.9%
Gresham: 8.8%
Clackamas: -1.7%
Oregon City/Canby: 3.7%
Lake O/West Linn: 3.8%
W Portland: 3.7%
NW Wash County: 2.7%
Beaverton/Aloha: 3.8%
Tigard/Wilsonville: 5.4%
Hillsboro/Forest Grove: 8.7%
Mt.Hood: 8.8%
Columbia County: 13%
Yamhill County: 8.2%

If you, or any other readers would like to receive a copy each month, go to our website to sign-up:
http://www.PortlandFixerFinder.com/market-reports

Also, I think buying a home in areas that have a strong commercial presence (i.e. restaurants, shops, etc.) really increases the livability of an area.........making it more desirable.......appreciation is consequently stronger........etc. Here's a map of particular areas in inner NE & inner SE Portland with strong cultural areas (and even a little bit of SW Portland):
http://www.PortlandFixerFinder.com/Portland-Hot-Spots
2 votes Thank Flag Link Thu Dec 6, 2007
Greetings Angie,
I wanted to give my opinion as a Realtor(c). There are a lot of homes on the market right now ( it would take over a year to sell them all) and many of those have been on the market for quite some time; making them prime potential for your investment, however I would not recommend a single family home for your investment.
I use a simple calculation to try to find my investor clients properties with a good ROI (return on investment). Look at the probable PITI (principal, interest, taxes and insurance paid monthly) You can use the mortgage calculator on my web site. http:// http://www.junelizotte.com. Determine the current rent coming in (by the way, I suggest a duplex, triplex or 4plex for the best return-rather than a single family home which will be much harder to gain from). Calculate the current rent and look at the condition of property (too much remodeling means decreased ROI ), then determine the difference between the PITI and the current rent. Is there a positive of $300 or more? If not you'll surely need to consider this may be a poor equity builder as you'll potentially be putting in money for upkeep, reserves, management, repairs, utility service etc which will all eat away your monthly cash flow and ultimately your equity if you don't see a positive number with that calculation.

Beware of any agent trying to promote one neighborhood over another- this is steering and it's illegal for realtors to do so. You'll have to do some due diligence on your own, but as a realtor, how I help my clients with their investigations is to provide them with a list of great resources where they can search for the answers they need like demographics, crime stats, business base etc. Let me know if you'd like that list of resources. I can email that .pdf file which covers the Portland Metro area. Best of investing to you!
Web Reference: http://www.junelizotte.com
0 votes Thank Flag Link Thu Mar 27, 2008
Hi Angie,

You can search new residential & multiple family listings in the Portland metro area at:

http://www.HouseNow.com

I agree with Jonathan about buying investment property near commercial amenity locations where typically there is a long term, appreciation component. Be prepared to pay larger prices as these areas are more appealing. Only logical, right? These areas with higher appreciation will command larger prices now and in the future. Question is, may rents hit a ceiling in these areas, whereas in other areas there may be an upside potential for rent increases?

Your best best for an investment property purchase is to start with your budget. If you have $30,000 to purchase, consider that as a 20% down payment...or $150,000 purchase. This avoids mortgage insurance, and a higher rate 2nd loan (most conventional lenders will give you 80% of the appraised value, requiring 20% down or 10% down and 10% 2nd loan). A $130,000 principal with insurance and taxes will mortgage calculate over a 15 year mortgage life or 30 year mortgage life at a rate that your rents needs to equal at minimum.....so your cash flow is even or positive.

If you enter into an investment purchase where your monthly debt service is greater than your rents, you should have a sound reason.....such as underlying land value &/or higher density residential zoning where you can add units, or a unit that can be remodeled or expanded upon such that you can gain at resale or command higher rents with more &/or better units. In any investment purchase, keep your resale and exit strategy in mind.

If you plan to hold onto it, purchase in an area where your rents command best appeal and upside potential. In any event, plan to put enough down such that your rents will exceed your monthly debt service.

Consider a 3-4 plex in Hawthorne that you can convert into condominiums? After condo conversion, you carve off and sell 1-2 units thereby putting you in a position to reduce your principle loan balance and maintain ownership of 1-2 units. Or, units near UofP, or PSU where college tenants pay premiums on a per bedroom basis and sign year leases. You also have opportunity to increase rents as tenancy season changes with the school year.

Thanks for reading, Regards, Chris@HouseNow.com
Web Reference: http://www.HouseNow.com
0 votes Thank Flag Link Mon Feb 25, 2008
Its all about getting it at the right price. If you need to rent, make sure its convenient.
Web Reference: http://nwmove.com/
0 votes Thank Flag Link Sun Feb 24, 2008
It would be tough to rent a house and cover the mortgage. It could be done with a few specific properties, most likely in North and SE PDX. I run across maybe 2 or 3 properties a year that would cash flow. They get snatched up pretty fast and usually require some work. There are many duplexes and 4 plexes that can cash flow right of the bat. Being a Landlord is not for the faint of heart, but can be financially rewarding. I have been a Landlord for over 20 years. Let me know if I can help.
0 votes Thank Flag Link Sat Jan 19, 2008
Nowhere that I can find. I have yet to find a house that would rent for more than the mortgage, assuming a 20% downpayment.

The price to rent ratio in Portland (and most other cities) is way out of whack right now.

If you're willing to take a loss while you rent, there are lots of options. But I wouldn't count on 10% price increases in the future, if you'll see increases at all. Check out the latest post on my blog for a preview of where prices are heading in Portland, year over year median prices are still up, but I predict they will decline shortly.

Good luck, and make sure you analyze anything carefully before jumping in.
0 votes Thank Flag Link Thu Dec 6, 2007
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