While in the Pacific Northwest, James & I have taken the opportunity to check out the latest on the Portland real estate market. As our regular readers will know, we started shopping for another investment property back in July when we were last here on a visit.
Since our visit in July, we have been looking at listings daily and flagging those that fit within our interests. We have primarily been focusing on our current interests in apartments, though we have been reviewing family homes as well so we will eventually know what the market looks like there as well.
Our primary focus at the moment is getting a studio or one bedroom in northwest Portland. We went out with our real estate agent on Thursday and checked out several.
So you might be asking, why shop for real estate when the bottom seems to have fallen out? Well, that is exactly the reason that we are shopping. We figure that if we are able to find a quality property at a good deal, then we may be able to recover faster and diversify our assets from what we have in the stock market. We also have cash coming in from my job, so that means we don’t have to sell stock to come up with the down payment.
The market overall in Portland has been holding pretty well, particularly in sought after neighborhoods. Overall though, you are likely to get a 10 to 20k reduction on the listed price, depending on how long it has been on the market.
Another factor is that rentals are in high demand right now. There was an article in yesterday’s Oregonian that said the current housing availability city wide is at about 4%, as opposed to 9% last year. Considering that this includes the burbs as well, this translates into high demand for apartments in prime locations.
So what process are we taking in moving forward?
First we are saving to get the last of the down payment. Luckily with our cash flow these days, it shouldn’t take much longer to come up with the $30k + that we will need. Right now we are at $17k with our recent tax returns. While savings seems to out of style, the process of saving up – including keeping our emergency cash untouched – will help to establish a solid ground for purchasing another place.
Next, we are looking at the rental market and assessing what we might be able to charge. The main idea is that the income will cover all of our costs; including mortgage, utilities, taxes, condo fees, insurance, repairs, etc. We are looking for a place that is move in ready, given that we are purchasing from a distance, so we don’t anticipate anything other than maintenance expenses.
Determining the rent will be done by a couple of methods. One, we’ve found a helpful site that helps to estimate the rent in a particular area. This site is called Rentometer and would be highly recommended by us DINKs. This is particularly helpful in that it shows exact prices in exact neighborhoods. Unfortunately for us, this means that it is clear that it is comparing NW Portland to other areas in the city that garner less rent generally. It also doesn’t have any listings that are in the primary area of town that we are looking at. This means that we will also be doing our own comps from Craigslist postings.
One thing that we have learned from Rentometer is that we may want to focus more on one bedrooms than studios. Comparably the median difference between a studio and one bedroom is five hundred dollars in the same neighborhood. Since the overall listing price isn’t that disparate between the two apartment styles, this means that we may be able to make more from a one bedroom than a studio. This might mean shelling up a bit more to begin with, but it might be worth it in the end. On a side note, one bedrooms will also be more appealing to the professional tenet as opposed to a recent grad.
We’ll keep you posted on our progress.