So, you’re relocating to Portland Oregon.  That’s awesome!  About 3/4 of Portlanders were either born here or relocated.  The other 1/4 were not sure about… just joking.  Attraction to this area can be attributed to several factors including entertainment, culture and cost of housing.  Believe it or not we’re ranked in the top 5 relocation destinations for the nation!

This blog focuses on Portland real estate and as luck would have it so will this article.  Surprise, surprise.  Coming from out of town has it’s difficulties so much research often takes place long distance before finding a suitable neighborhood to buy a home.  Here are 6 big tools to help with neighborhood research:

School ratings.  Whether or not you have kids is not the point.  Schools are one of the easiest ways to determine whether neighborhoods are going to be a good match.  There’s a fantastic website (www.greatschools.net) that rates schools on a scale of 1-10, 10 being the best.  Elementary schools pull from a small radius.  RMLS lists elementary schools as a required field.  Even the laziest agent has to fill in this information before a home listing goes public, therefore, house searches can be centered around specific schools.  While a home’s elementary school rating is not everything, it is a reflection of community.  Better school rating, nicer neighborhood.  Check it out if you’re familiar with a particular school location in the country and see for yourself, this is a national tool.

Very few neighborhoods in Portland actually feed into “10″ rated elementary schools.  Bethany, Cedar Mill and Laurelhurst are the only ones, last time I checked anyway.  Lake Oswego/West Linn ranks top in Oregon too, but it’s a suburb-type city.  Some of Beaverton’s schools are rated well too.  It’s amazing that within only a few blocks school ratings can vary significantly, so do the neighborhoods.

Food Shopping – QFC, Whole Foods, New Seasons, and other high-end grocery storesare an indication of neighborhood quality.  Also, check out Starbucks.  They put alot of research into store locations and won’t plant one in a sketchy area.  Stores mentioned above can only thrive in certain areas, areas of higher income mainly.  Money isn’t everything.  Check out crime stats, income levels and other census information at www.portlandmaps.com but look at grocery shopping more than just shopping.

Pictures – Every Realtor is now required to upload at least one front shot of the listed house within a few days of input into RMLS.  Searching Portland homes for sale from a distance has it’s hurdles, especially when not familiar with the city or surrounding locations.  Want to know what a neighborhood really looks like?  www.maps.google.comwill put you right in front of the house you’re looking at online.  It’a a tour right from your desk.  Pan around, look at surrounding homes, see how many cars are parked on the neighbor’s lawn, how many washing machines are on their porch?  www.earth.google.comhas similar aerial shots.  Many times, there’s waaay more to the story than what RMLS pictures stratigically leave out.  How close is the subject property to commercial buildings, apartments or a freeway?  Value is affected by such.  This is a great tool!

Visit the website for Portland relocation, Portland neighborhood information, and Portland homes for sale throughout the metro area.  www.maxwellsinclair.com

Many properties in the marketplace today fall within one of three categories peaking interest of investors/rehabbers.  Foreclosures, short sales and listings labeled as fixers.  So, which one will provide the greatest potential as far as return?  Property analysis is same regardless of the selling situation.

Here’s a fairly typical case study

Yesterday I went out with clients looking at an entry level project house for sale.  It came on the market that day and was listed at $169k.  Wow!  Houses in Beaverton listed for that price draw attention.  Very few properties for sale even come up under $200k (detached homes).

Looked like a decent deal at first glance.  Hey, you can practically break even on payments with 20% down using it as an income property.  Pretty interesting, on paper…  We arrived at the home and it did match the pictures a little too well.  Blue roof of several layers, single pane windows, cheapest sheet siding known to man, and best of all… trashed.  Rather bummed on this find.

After quick review of the surrounding homes and overall condition of the neighborhood it was estimated that resale in average to decent condition would fetch around $190k.  A rough guestimate of rehab costs was an easy $20k as long as sweat equity was involved and not 100% contractor labor. Question then is; At a list price of $169k is the home worth purchasing strickly for potential gain?  In my opinion there are more lucrative forms of real estate investment out there.

Taking a look at overall investment costs, just rough numbers:

Loan and closing fees: $6000

Carrying cost during rehab: $2000 (figure two months)

Material and labor costs: $20,000

Total investment: $28,000

From $169k add this $28k and we have a product that most likely isn’t going to sell for the money spent.  If a buyer is looking at keeping as a long term rental or primary residence it’s not too bad.  For $197k you’ve pretty much got a new house but for immediate resale… dream on, there’s no money in such.

My guess is that this particular piece of Portland Oregon real estate is not going to sell in it’s current condition for much over $160k and it’ll take a couple of low-ball offers to convince the seller of such.  Still, if you’re searching for fixer type houses for sale in Beaverton, Hillsboro, or any other Portland metro area you can do better.  Look for key words like “fixer”, “short sale”, and “foreclosure.” Check out the website and search all RMLS listings for free at www.maxwellsinclair.com.  Great investment opportunities are available with a little searching!

It’s an interesting real estate market here in Portland and one that heavily favors Portland real estate investors.  Depending upon whose real estate study you’re looking at and where in the country it was generated you can expect somewhere between 5 – 7% annual appreciation.  Keep in mind that appreciation is not linear.  That is to say price does not necessarily go up 5+% each and every year.  15% appreciation one year, -5% the next…

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

Listening to Non-Professional Advice

So you’re shopping homes for sale in the Portland Oregon area.  Good for you.  It’s a fantastic buyer’s market at the moment and mortgage rates are awesome!  Now all that’s needed is some expert advice from a relative or co-worker.  Make sure that the last house this person bought was in Detroit and about 20 years ago.  I’m  being sarcastic.

Hey, most people mean well but unless advice comes from someone who’s emmersed in the current local market it might be good to take it all with a grain of salt.  Keep in mind that real estate markets are not national and are dynamic.  What was common practice 6 months ago may not even apply today.

The purpose of a Realtor is to negotiate the best deal possible, protect your interests and watch out for pitfalls that’ll potentially cost you money.  Get advice from people and run it by your trusted real estate broker to see how applicable such can be at this point in time.  I can’t tell you how many buyers have missed out on properties because they insisted on listening to non-professional advice.  A good Realtor will keep you on track!

Not Shopping the Mortgage Market

Shopping the mortgage market can be a frustrating experience.  Mortgage brokers are required by law to give quotes in writing along with a Truth in Lending statement.  What’s known as a Good Faith Estimate (gfe) shows closing cost numbers.  Without getting into too much detail essentially this allows home buyers to compare mortgage brokers in the same format.  Like any other industry there are honest, ethical lenders and those who you may not want to do business with.

A good real estate broker should be familiar with how to read a gfe.  He’ll can potentially identify numbers that are blatently high by comparison to the norm or those which could even be missing from the equation.  By no means should your real estate broker be considered the mortgage professional.  Double check numbers by running line item costs past several lenders.  If the numbers are accurate they should fall within a small margin of eachother on all gfe’s.

Does the real estate broker have to know your personal information?  Heck no.  Looking at a good faith estimate does not disclose buyer’s income, cash reserves, or any confidential information.  It gives a general overall picture of home purchase costs that will be related to a purchase price.  The buyer’s agent gets all this as part of the transaction’s closing documents regardless.  It’s called a closing statement and all parties involved see such.  Sharing a gfe during infancy stages of home buying with your Realtor could really help save money!

Not Interviewing Real Estate Brokers

Unless you make a point to sit down with several agents it’s tough to find a good agent.  Some are actually rated by outside companies based upon client feedback.  After puchase of a home is completed buyers will receive surveys from monitoring companies asking for ratings of agent performance.  These companies are not related to the broker in any way, keeping feedback objective.  Third party companies like QSC (Quality Service Certified) allow clients to submit feedback that actually ranks agent performance on a scale.  Agent ratings are available to anyone who wants to review such before getting involved.  Very few Realtors are monitored!

Ask for a list of referrals from buyers/sellers who’ve done more than one transaction with subject agent.  No agent with good community standings is going to object to contact of past clients.  Might want to think twice if there are no referrals immediately given.

For more tips on buying Portland real estate visit our website.  www.MaxwellSinclair.com