As a new or an experienced real estate investor, you should always look for new markets. How about investing in Portland real estate then?
Even if you are not from Portland or from Oregon at least, you should think about this option for an out-of-state real estate investing location. Here are the reasons why.
What Does the Portland Real Estate Market Look Like?
We can sum up the answer to this question in one sentence: The Portland real estate market is on the rise. 2016 was another year which witnessed significant property price increases, a shortage of sellers, and a surplus of buyers. This is even more impressive considering that developers finished 3,700 housing units in 2015 and another 6,500 units in 2016. The facts are pointing out that the Portland market is a seller’s one at the moment, which should not discourage you from investing in Portland real estate. On the contrary, now is the right time for Portland real estate investments as prices are set to keep going up. Indeed, 2015 and 2016 experienced double-digit growths in the price of an average Portland investment property, and according to experts, this trend will continue. First, this is great news for investors looking for short-term profits (positive cash flow) as this situation will most likely cause a deficit of homes and an increase in the number of people looking for rent. Second, it’s also great news for investors interested in long-term gains (real estate appreciation).
Related: Is It OK to Invest in Real Estate Just for Appreciation?
What Is Driving These Dynamics?
There are two major, interrelated factors determining the demand for real estate properties in any location: 1) the economy, i.e. the available jobs, and 2) migration (strongly affected by the economy).
1. Portland’s Economy
You will be happy to hear that according to Bloomberg data, Oregon’s economy was the best performing one across the US in 2016, in terms of employment, income, tax revenues, home prices, mortgage delinquency, and publicly traded companies’ equity. Portland’s economy in particular is also very healthy, and it is expected that job growth in the next 10 years will be 41.2%.
2. Migration to Portland
The expected job creation in the near future means that migration into the metro area will continue, pushing demand for housing and real estate property prices up. So, hurry up with any Portland real estate investments.
3. Millennials
There is a third factor influencing investing in Portland real estate – millennials. There are plenty of them in Portland (partially attracted by the job opportunities), and they are looking to buy homes. Affordability is becoming more and more of an issue in Portland as real estate prices are on the hike, so many millennials will need to rent instead of purchasing their own property. Again, that’s great news for anyone in possession of a Portland investment property.
But speaking of affordability, let’s take a look at the figures for an average Portland investment property.
How Do the Figures for a Portland Investment Property Look Like?
The numbers below have been computed by Mashvisor’s investment property calculator, which is a real estate investment tool that saves you lots of time and energy by eliminating the need to do market analysis and calculate real estate comps on your own.
- Median Property Price: $524,000
- Traditional Rental Income: $2,000
- Airbnb Rental Income: $2,180
- Traditional CoC Return: 1.8%
- Airbnb CoC Return: 2.2%
- Traditional Cap Rate: 4.8%
- Airbnb Cap Rate: 5.3%
- Airbnb Occupancy Rate: 25.7%
The figures from Mashvisor’s rental property calculator reveal that affordability is already a problem in Portland. While the median property price of over half a million dollars is below the prices in other hot markets such as San Diego ($828,000) and Los Angeles ($939,000), it is well above the level in many other top markets like Chicago ($366,000) and Miami ($434,000). Meanwhile, the expected rental income for both traditional and Airbnb is very good. The profitability numbers don’t look too great, but don’t forget that these are averages for the city, and the CoC return and cap rate for actual properties are likely to be much higher.
The figures above show that Airbnb is the better rental strategy for Portland real estate investments. This brings us to the question:
Related: Portland Investment Analysis
How About Portland’s Airbnb Laws?
Airbnb is legal in Portland. There are some regulations though. Hosts are required to obtain accessory short-term rental permits if they will be renting out their property for less than 30 days. In addition, they must live on their property for at least 270 days a year. Hosts also need to inform their neighbors of such activities and to pay certain taxes. However, many doubt how well these regulations are applied. In any case, Airbnb is fully legal and entirely possible for investing in Portland real estate.
Related: Cities With The Least Airbnb Legal Issues
Once you’ve decided that you want to study further the possibilities for investing in Portland real estate, you need to look for the right neighborhood for your future Portland investment property. Following are figures on the 3 top neighborhoods in Portland from Mashvisor’s investment property calculator.
What Are the Best Neighborhoods for a Portland Investment Property?
1. East End
- Median Property Price: $499,000
- Traditional Rental Income: $1,930
- Airbnb Rental Income: $3,820
- Traditional CoC Return: 1.5%
- Airbnb CoC Return: 5.7%
- Traditional Cap Rate: 4.6%
- Airbnb Cap Rate: 9.2%
- Airbnb Occupancy Rate: 56.1%
East End is located just next to the Old Port and Downtown Arts districts, which are some of the top attractions in Portland. It hosts many restaurants and shops and is the most profitable neighborhood for Portland real estate investments. The optimal strategy for an income property here is Airbnb.
2. Downtown
- Median Property Price: $459,000
- Traditional Rental Income: $1,700
- Airbnb Rental Income: $3,610
- Traditional CoC Return: 1.5%
- Airbnb CoC Return: 5.7%
- Traditional Cap Rate: 4.5%
- Airbnb Cap Rate: 8.9%
- Airbnb Occupancy Rate: 54.9%
Downtown is the neighborhood located right in the center of Portland and features numerous venues for shopping and dining. If you decide to go for a Portland investment property in Downtown, you should do it Airbnb.
3. Boise
- Median Property Price: $442,000
- Traditional Rental Income: $2,040
- Airbnb Rental Income: $2,960
- Traditional CoC Return: 1.8%
- Airbnb CoC Return: 3.5%
- Traditional Cap Rate: 4.8%
- Airbnb Cap Rate: 6.6%
- Airbnb Occupancy Rate: 57.2%
Boise is an excellent neighborhood for purchasing a Portland investment property, located in the North and Northeast sections of the city. The neighborhood has undergone extreme growth and gentrification in the past few decades, and these processes are still going on. In Boise, Airbnb is the better strategy.
These are the reasons why investing in Portland real estate should be on your radar in 2017. Once you are ready to start your search, don’t forget to check out Mashvisor for the properties available there and their expected profitability.
