How can buyers have first shot at the good deals?  Reality is that 99.9% of real estate transactions happen through Realtors.  Hook up with a good one.  Agents working with investment property buyers need to stay on top of new listings and do market research immediately as houses become available.

What’s a good deal for investors?  Take a look at Portland’s west side for example.  Beaverton homes and Hillsboro neighborhoods often offer better cash flow than those found elsewhere.  When looking at the home purchase consider what sort of expenses are attached directly to PITI (principle, interest, taxes and insurance) and what neighborhood rents are.  Entry level homes offer much more bang for the buck than higher end, rental wise.  Rents on a 1200′ 3 bedroom 2 bath detached Beaverton home are running around $1100/mo at the moment.  Figure a good price for such a property might be $175k.  Compare that with cash flow on a $350k home where rents may be $1600/mo.  You do the math.

Competitive nature of investors.  Being first to the table with an offer is key.  It’s almost better to shoot first then aim in this market, you’ll have opportunity to bail out later.  I’m referring to red hot bank dumped properties here and not average run-of-the-mill real estate.  Hot properties like ones priced at $90 sq. ft. vs. the neighboring ones selling around $150.  These will be bank-owned foreclosures in Portland and surrounding areas, and they’re marketed through agents just the same as any other property.  I’ve seen several in the last few months around Beaverton and Hillsboro, they do exist.  Jump on them the same day they hit the market.

Sitting on the fence. At any given time there are a ton of buyers who say “wow, that was a good deal.  I’d have bought that one… if I’d known about it.”  The only reason buyers don’t know about it is because they (and their Realtor) are not paying attention.  Countless would-be investors sit on the fence analyzing a particular property while another savvy investor snatches it up.  That way the little kid mentality can kick in; That guy wants it, now I really want it.  Not all properties listed in RMLS are still available, some are awaiting bank paperwork before listing a property as “pending” in the system.  Dilly dallying doesn’t pay!

Here are 3 factors to consider when evaluating overall return on investment:

1. Look at the surrounding area. Portland Oregon has many neighborhoods and surrounding cities like Beaverton, Tigard, Hillsboro, and Lake Oswego.  Within each city are well-regarded and not so well-regarded locations.  This can be seen by driving a couple city blocks in one direction.  How does the subject area compare?

Real estate investing should be viewed as a long term event, more than 3 years.  Google.maps.com has an awesome tool for helping evaluate neighborhood condition from your desktop.  Use the “street view” button to pan up and down the street taking not of vehicle and yard conditions as well as house curb appeal.  Look at aerial views to get an idea too.  More trashed and dead looking vehicles may mean that community involvement is seriously lacking.  A sign of real estate future values.

2. Look for upside potential through remodeling. Buy the worst house in the nicest neighborhood.  We’ve heard that one before.  Beaverton and Hillsboro offer some of the most cost effective real estate investment for single family homes.  When looking for future returns think about what can be done through simple upgrade.

Take a 1970′s original house in Beaverton.  With current Portland real estate prices it’s ease to pick up a great deal around the $200k price point.  This will be a three bedroom 2 bath ranch style house on a 7000′ lot.  Very easy to update and with a little sweat equity can be done well for $10k.  Upside potential for rent is now there as well as resale.  A wise use of $10k.

3. Evaluate cash flow. Much of newer construction and higher density housing is subject to HOA fees.  Property management, repairs, maintainence, vacancy are key factors to consider.  In the above example we refer to Portland investment property, specifically Beaverton.  There’s a good balance of cash flow here, possibly more so in Hillsboro.  House prices are becoming more attractive all the time in many neighborhoods.

Single family nvestment homes provide a minimum amount of expense after remodel.  There’s not much to break, also one of the benefits of purchasing newer homes.  Tenants pay for all utilities.  I also mention in my website additional tips on having tenants take care of small repair, this minimizes cash loss.  If possible, manage property yourself.  Management fees will run 7% every month.

There are a ton of good informational tips on my site www.MaxwellSinclair.com.  Please feel free to call and discuss investment ideas and tips of your own.  David Somerville 503 789-7633

Take a look at what’s happening now.  We’re experiencing a buyer’s market where prices of Portland real estate have dropped very little compared to just one year ago.  Being immersed in the field I can tell you that prices have declined more than statistics show.  In 2006 buyers were very hard pressed to find homes for sale in Beaverton anywere under $220k.  Now those same homes are running close to the $200,000 point.  About a 10% reduction in 2 years.

The great thing about being an investor is that you’re looking at the long term return.  Single family investments yield better returns on the lower end, such as a $200k home in Beaverton Oregon.  An average condition ranch style home will fetch an easy $1100/mo in today’s market.  Do a little remodel and $1200/mo is not a problem.  Try that 3 years ago and you’d be looking at big vacancies.

Rents are heading north.  They’ll continue to do so as long as our housing market remains in a slump.  Great time to be a landlord and invest in real estate.  Prices are down, inventory is up, mortgage rates are increadibly low today.  At 5.375% for a 30 year conventional loan money is cheap.  Add .5% roughly for an investment.  No one has a crystal ball but signs are very promissing that now is the time, buy low.

Capitalize on overall return, not cash flow.  Here’s a rule of thumb you possibly haven’t heard before; Buy entry level investment houses with 100% financing (or as close as possible to) where rent covers the mortgage payment (principle and interest only).  There will be negative cash flow because you’re paying taxes and insurance out of pocket each month.  It is possible to do this.

100% financing is still available through various sources but most easily structured through a home equity line of credit on primary residences plus 80% ltv on the purchase.  Very few houses qualify, in my opinion, as good candidates for this formula.  They’re usually fixers in need of about $10k worth of work (sweat equity).  So, with $10k invested in this property and the rest financed you’re only negative roughly $200/mo (taxes and insurance).  Pretty bad right?  Maybe not.

Cash flow can be a very short sided approach for some people.  There are 3 major factors to keep in mind; tax deduction, depreciation, and return on investment.  Overall, in today’s market, you’re probably not coming out ahead due to the direction of prices.  When our housing market turns around such an investment will return a very attractive number overall.  Prices have not gone backwards like this in approximately 40 years.  It’s not going to continue!

Like always, I encourage your comments and objections.  Is investing in this market right for you?

Feel free to check out Portland Real Estate for Sale and investments guides at www.MaxwellSinclair.com