There’s a lot going on in the Portland real estate market, and many investors have arrived to buy properties and rent them out. Many of these investors do really well and they are making their success look easy. But, we all know investors who struggle. They aren’t doing as well, and success seems impossible.
With that in mind, today we’re talking about the best strategy for investors to employ in order to enjoy long term investment success in the Portland real estate market.
Common Traits to Successful Investors
Regardless of the geographic region you are investing in, there are some commonalities and traits that successful rental property owners all incorporate. They know how to identify opportunities, what sort of leverage to use, and how to put together a stellar team of professionals who will help them succeed. They spend time getting to know the industry and their market, and they stay informed.
Successful Portland Real Estate Investors
If we are talking about the Portland market and real estate in the Portland metro area specifically, successful investors really have to understand the political landscape and the laws that are both in place now and under consideration. Portland is a bit unique when it comes to that. You have to understand the economics of the city, and why things operate the way they do.
Investors who want to succeed in Portland need to be able to think about the long term.
Here is an important example. Portland, Oregon has an urban growth boundary. What this means is that building and development is limited because the people living here prefer density, and we don’t want sprawl.
This has created a scenario over the last 40 years in Portland where we cannot keep up with the demand for housing. In fact, for every 100 units that we need to build in Portland to keep up with demand, we can only build 90.
After three or four decades of this policy, you end up with a pretty incredible housing shortage. More people want to live in Portland, but we don’t have the housing to support the increase in population and interest. But instead of correcting this problem and reducing the regulations that are causing it or encouraging more building and development, additional laws have been put into place to further squeeze the existing housing market.
This just happens to be aligned with the culture and the climate here in Portland. A successful investor, therefore, needs to understand that Portland would rather have a housing shortage than sprawl.
Increase in Affordable Housing
To invest successfully in Portland real estate, you also have to understand the city’s commitment to affordable housing. In 2017, a law was passed that required all new development for multi-family properties with 15 units or greater had to dedicate 20 percent of the units to affordable housing rentals.
This means that if you’re building a 100-unit apartment complex, 20 of those units are going to rent for between 20 and 30 percent less than the other 80 units.
The value of real estate as future cash flow has greatly depressed the future value. Before this law was passed, a lot of applications were filed to build new housing. A good, successful Portland investor is deciding that despite this blip, the surge of supply coming onto the market will continue to drive prices up. This blip will end in about three years, or in 2021. We’ll have this three to five year gap with no new supply coming onto the market. Once the law was implemented, applications for building permits fell right off a cliff. So, the long term investor is planning. A smart and successful investor will know that in the first three to five years, growth may be slower, but by looking five to 10 years out, it will be easy to see that these rules will not impede growth or profit. Rental property owners will only do better.
The Portland Real Estate Market will Evolve
In the long term, Portland investors need to wait for the market to evolve. If you’re buying a rental property now, you know that over time you are going to earn quite a premium because of simple supply and demand.
Portland is implementing a lot of rules and regulations that will do everything possible to limit and deter investors from building more housing. However, the consistent migration into Portland, Oregon and the demand to live in the city is just getting stronger and stronger. Population growth in Portland is projected to be on the top of national trends. It’s going to experience robust growth in the years to come. Investors who see that these restrictive policies will only increase a strong demand with a shrinking supply will do well with their investment properties.
If you can think about a long term investment strategy and hang in on the market for three, five, 10 years, or even longer, you’re going to do well in Portland. There’s a lot going on in this city, and you need to be prepared, educated, and focused on the stability of your portfolio.
Investors who are interested in learning more about Portland real estate can contact us at Mynd Property Management. We’d love to discuss this topic with you further. Investing in Portland is something we’re passionate about, and we’d love to hear and talk about your personal investment goals.
You can also visit our Facebook group of investors, which is called Master Mynd. It’s a real estate investors’ club, where you can exchange ideas with other owners. Check out our weekly podcast as well, called The Myndful Investor. We invite leaders in real estate and property management to talk about their success and, more importantly, their failures. There’s a lot to learn from this relatable content.