Although I try to keep this blog pretty geographically neutral, many of you know that I currently reside in the Portland, Oregon area. Although we aren’t planning to stay here that much longer, it’s a great place to live and we almost hate to leave. But we have made personal commitments to move closer to our family. In the meantime, my new hobby is going to be learning more about the local Portland real estate market. Hopefully I can better understand which cheaper neighborhoods are on the upswing and also look for houses for potential rentals. It also gives me something to do before we find new jobs and can therefore start looking for houses for ourselves. 😉
Besides comparing mortgage payments and the market rates for rent, I also need to figure out:
- Local property tax rates
- Average home insurance costs
- Average Vacancy rates
- Home warranty costs
- How to find foreclosure listings and auctions
- Property manager recommendations and rates
- (anything I’m missing?)
I’m probably not going to contact any real estate agents or mortgage brokers just yet, as I don’t want to waste their time. I’m going to hit the Open House circuit on weekends and maybe talk to For Sale By Owner houses. Pretty much keep it low key, but hopefully educational too. Also, I’ve discovered that while people tend not to like talking about money and salaries, they are much more willing to talk about houses!
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My wife and I both work in Portland but we bought our house in Vancouver – lower prices, bigger lots, better schools.
Vancouver definitely looks nice. You also get that income tax break. But man, does that traffic look bad during rush hour!
Jonathan, I’ve found a great resource for a lot of taxing questions, ownership, ect can be the appraisal district. I’m currently in houston, and the appraisal district has online access to all of the records in the houston area… http://www.hcad.org perhaps there is something similar in portland…
Property taxes are an interesting beast. Here in CA we had Prop 13 passed a long time ago, where baseline rates of 1978 were fixed and annualized increases were limited to a small (
Have you checked out zillow.com?
Well, it depends on how much money you have available and/or can borrow, etc., but here’s my advice if you and your wife make less than $100k. First, find a transitioning neighborhood with historical homes. Look for one that is bigger than you need, but is a fixer-upper (livable, but needs updating/remodeling). Then, if its one that lends itself to dividing into multiple living units, fix up a independent portion and rent it out. If it doesn’t break up easily, just get a roommate. As long as you continue to manage the property yourself and make less than 100k, the roommate/tenant = big tax deductions when you continue to fix up the place.
Every dime you put into the house will both enhance the house’s value AND be a tax deduction off your regular income taxes. You just apportion the amount rented out and apply expenses accordingly. This will reduce the amount of your regular mortgage interest deduction, but the remaining portion will still count as a business expense. Also, property taxes and the utilities you provide your tenant/roomate are deductible based on the apportionment. And of course, there’s the additional rent coming in from the tenant/roomie.
If it seems complicated, TaxCut and TurboTax make it reasonably easy. I wish I thought of it myself, but I sorta discovered it accidently. Either way, my networth went from about a negative 20k, to a positive 65k in about two years- although a realty market crash could compromise this number for awhile.
I would say info about local zoning laws regarding numbers of apartments per property permitted. I think you once mentioned something about a multi-family property but sometimes they can be tricky. Where I live, we are only allowed to (legally) have a mother/daughter arrangement with a separate apartment (there are exceptions for seniors though). So we couldn’t for instance, rent out an apartment (legally) to anyone other than family. That’s a good rule and a bad one. Good for the neighborhood, bad for investment property!
In a similar boat; just left Portland 6 months ago to be closer to family. It was a wonderful place to live, and there is a lot we miss about it.
The City of Portland has a wealth of information at http://www.portlandmaps.com, including tax assessment values and property tax amounts, prior sales amounts, and even some cool mapping features including crime and risk from natural hazards like floods and earthquakes. There is a wealth of information there. Simply punch in a specific address, or browse by neighborhood.
Yeah, I need to do more research on taxes et al. I remember when doing jury duty seeing a lot of properties up for auction in the courthouse.
Zillow is fun for estimating, but they are very hit or miss depending on the quality of information they have to deal with.
I like the Portland area because you can still find houses for under $150-200,000 in certain areas. That’s much easier to handle than in other West Coast markets.
That’s very true, there are TON of illegal apartments where I live. They are even sold that way. “4 apartments in building, but listed on records as singly family household.” How you do you report all the rent on your taxes if it’s supposed to be one house? I need to ask my accountant.
Thanks for the link, Colin!
If you are moving, you might want to focus on how to buy a house under market value. There are a ton of courses out there that teach you how to find properties before they hit the market. Doing what you are doing will educate you, but for the most bang for your buck, you might invest a few hundred in a course, stay home, and study. What you learn may or may not get applied to your personal residence, but it is a skill that you will have for your life that can bring return after return. I would start with a course about wholesaling properties, they can teach you how to find a home. There are also some very good newsgroups with lots of free info, and really, you can get all the info you need there without buying a course.
Man, are you right! Here in New York, “So, how much are you paying?” is the new “So, how’ve you been?”. It seems to be the primary topic of conversation at dinner parties, cocktail soirees, and just about any time you might have a few people or more over to another person’s house. It’s all they have on their minds!
That is a good point. In my case, my zoning allows for duplexes and probably many old neighborhoods would. Technically, I probably should separate it into two addresses, but if my property is a “duplex” instead of a SFR, it drops its value. I figure its reasonable to keep it officially as a single family because for about $500 and two days of work, it could readily re-convert to a single family residence. It would involve the removal of a door, shifting around some large appliances and re-converting an electrical plug. Thats it.
Doesn’t Oregon still have that law that requires the government to pay you anytime a regulation effects the value of property….? That pretty much guarantees you can do whatever you want, the government doesn’t want to have to pay you to enforce their laws.
Amanda – funny comment. A few years ago everybody in Silicon Valley was talking about stock, net worth, etc…..and then the market crashed.
I think the same thing is happening with housing. Whever too many people start talking about something its time to get the H out in my opinion. Hasn’t failed me yet.
Location. Location. Location. Quality of the schools matters to a lot of people when they buy. I think this is true no matter where you live. Prices may be great in some areas that are ‘up and coming’ but what is the quality of the schools in these areas. What are you going to have to pay to send your kids to private school if the local schools suck?
CA has prop 103 which means no periodic reassessments. Does Portland go through the quadrennial reassessment thing like some other areas of the country? You can be in for a rude shock when your turn comes around.
I think that in general when you add up state sales tax, property taxes, and state income taxes a lot of things level out across the country. Sure CA has prop 103 and you are forever locked in to your purchase price and no more than I think a 5% increase in your tax in any given year. But we pay ridiculous state income taxes and sales taxes.
How bad is the commute from Vancouver? Cannot be as bad as any of the commutes in SoCal. Last time I was in Portland on business was the early nineties. They could not believe the commutes we put up with in CA. You can get used to anything unfortunately.
Whoa, I live in P-town too.
Real estate housing bubble anybody???
All you need is zillow my brotha!
How interesting. My girlfriend and I moved to Portland back in July in an effort to be further away from our families!
We’re renting, and will be for at least another year but are starting to talk and think about buying. My current working theory is to buy in a suburb where they are planning to extend light rail. Since I can’t live without public transit (I’m from the east coast) it would be good for me, and if I get in at the right time I might be able to get a huge upswing in value in a relatively short period of time.
Since Clackamas (I-205/Green Line) LRT is being built now, thats where I’m thinking. But it sounds like the next line after that will be down Barbur Blvd out to Tigard, so that seems like a great possibility to me. Besides, the commuter rail out there is already being built and they have decent buses.
So, how does this work – I am presently renting and hoping to own soon.. querying the property tax appraisal of my city states –
CFR FRISCO CITY 0.450000000
GCN COLLIN COUNTY 0.245000000
JCN COLLIN CO COM COLLEGE 0.087683000
SFR FRISCO ISD 1.580000000
How do i read this ????
Hey Jonathan,
If you haven’t seen this yet check it out. I’m not sure of the algorithm used to calculate the value, but by any measure it seems like you are doing well.
shortened link
Anton
Jonathan,
Again sorry to be a downer, but I believe right now (and the next several years) will be incredibly bad times to buy real estate. I outlined a lot of my reasons and gave some links to very interesting web sites in your other post that had the crazy graph on it with home values skyrocketing.
So I won’t go into everything again. The one point that I will continue to stress is that you need to look at rents in the area and compare them to what it will cost you monthly with 20% down, and a fixed 30 year mortgage. Make sure to take into account the opportunity cost of the downpayment as well as property taxes, insurance, etc. Then you can also figure out the tax benefits and factor those in as well.
Basically, what I belive you will find is that renting is significantly cheaper to own. There will always be a premium to own, however I believe that we have seen such extreme multiple expansion on the values of homes (think P/E multiples of stocks) that it makes no sense to buy. Everyone buying over the past 5 years has been buying mostly on speculation, so we see that home prices have a huge “speculative appreciation” premium built in right now. Added to this fact is the incredibly loose credit we have seen over the past few years. All of this together means that as prices are now flatlining and beginning to fall, we will see rents come more in line with the cost of owning. All of this will take a lot of time, so if you buy now or in the next year or two, you are still paying the “speculative appreciation” premium even though it isn’t justified anymore because the air has come rushing out of the bubble.
So again, my advice is to wait and buy when local incomes are the support for valuations and when rents come closer to being in line with buying. Be patient.
Don’t worry, chances are I won’t buy anything at all. Mainly working on learning things so that when the time is right, I’ll be ready. I don’t have that much money anyhow 😉
Re: Vancouver and traffic. Yes, I-5 can be nasty (not California nasty, of course) during rush hour – I avg about 45 mins between north Vancouver and downtown Portland.
Re: the income tax break. You only get the break if you also work in WA. I work from home a few days a week, which allows me to pro-rate my OR income and make the traffic issue a bit more bearable. You’d think people up here could drive in the rain – this morning was nuts!
Local property tax rates: *check the listings of various properties (posted taxes may be for year 2005 or 2006 depend on length listed)
Average home insurance costs: *general rule: price / 1000 x $3
Average Vacancy rates: *
Home warranty costs: * ??
How to find foreclosure listings and auctions: *try foreclosure.com; flsonline.com; your bank may have properties listed; federal HUD.
Property manager recommendations and rates
(anything I?m missing?) : *HOAA fees, if applicable. *Maintenance fees (lawn&garden tools,) *Water and sewer and trash bills *Rental rates (online apartment listings & local newspapers) *Car tax
Thanks for posting this! I’ve been to Portland on several occasions and thought about buying a house. But I heard property taxes were expensive! The NW Gleason area near the hostel is one of my favorite parts of Portland. I like it better than the Hawthorne area. And some of the cafe’s and restaurants open past 2am, something you can’t get in San Francisco.
Have you looked at buying in the suburbs of Portland? Like Lake Oswego? or Oregon city? Does it rain constantly in Portland?
NW Portland is nice. I’m definitely looking in the suburbs, as all the high-end stuff the mortgage/rent ratio is just too high. It rains a lot in the winter, but the summers here are great.
Here’s an article to read about evaluating income properties.
http://www.citywide-brokers.com/getting_started_in_investments.htm
Gross Rent Multiplier and Capitalization Rate allow you to compare like proprties. It also shows you the power of raising rent since the value of your property can dramatically increase from small rent increases. Multiple units are attractive (4 or less) since vanacies play a smaller role, and they are still consifered residential (as opposed to commercial).
The key factors with income property in my opinion are: Is the property cash-flow positive from day 1, does the city have rent control. Rent control can turn your winner of an investment into a loser and is socially a bad thing since it creates slum lords – it also makes legal issues of dealing with bad tennants a nightlmare.
I wouldn’t suggest bothering with foreclosures, if there was easy money to be made, people with lots of money would already be doing it.
Prop 13 in California is attractive for income property since it allows you as a landlord to be able to have competitve advantages as time goes on. If you hold the proprty for a long time, your property tax can be less than 1/3 of the person who buys the equivalent place next door – meaning you make a heck of a lot more profit than them and there are barriers to entry (you can compete on price and have a lower vacancy rate). This is NOT a good thing for capitalism or local government, but as a property owner it’s a great thing.
I live in Portland, and I’m not worried about the market here. I don’t think you can generalize about housing markets, especially across the country. The LA Times had an article about predicted drops in real estate values, and Portland’s was predicted to be less than one percent, while Arizona was predicted to be huge (I can’t find the article now, unfortunately). But because other areas have allowed their cities to become massive sprawling suburbs, they’ve lost character. Portland, on the other hand, has a very strong neighborhood pride, which has kept each of the areas in the city unique. I think that will also serve it well in keeping property values up.
If you buy in the suburbs, you have to watch out for which areas are going downhill. They’re tract homes, and it can be difficult to set them apart when you try to resell. I looked at townhouses in Aloha and Tigard when I was looking to buy and there was absolutely no community feeling, but I would be paying just as much for a new tract home as I did for my older ’40s house in Portland. And my house has a yard, is walking distance from shops, and I know my neighbors.
After 3 months of renting in Beaverton (the supposedly family friendly, safe suburb,) my housemates’s wheels were stolen off her car, our neighbor’s stereo was stolen… and I got sick of feeling like an alien when I went out riding my bike.
In the end, buy something you love (would you want to live there for 5 years?). Don’t pay too much for it (is the quality up with the price, or did they do a crappy flip job and now need an out?)
Most important, don’t be afraid to offer a bid lower than asking price. See when the house went on the market and you can gauge how desperate they are. A lot of sellers are pricing their properties 30k higher in anticipation of lowballs– you don’t lose anything by making an offer. And get a realtor– it’s free for the buyer in Oregon.
Rental companies like American Property Management, Princeton and Aggressive are vampires, sucking the life blood out of our communities. Rent is an important issue for PSU students and housing is too. Portland needs rent control. The property companies are just too greedy.
Monkeywrench=======(!______!)