Jim Lutz, CCIM
503-750-6388 direct
Jim@jllutz.com
Chris Johnson, RECS 503-407-9924 direct
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Rules of Thumb
Below you will find a current summary of plex market conditions in the
Portland metro area. Since each area of the city will have varying sale
numbers we have decided to provide this summary overview.
#1 Rule of Thumb
-
Annual Gross Rent Multipliers (GRM) are 9 to 20 in the metro area. I works just
like you think it would - Hawthorne District and other defined fun, exciting
neighborhoods are on the high end while mid county, Beaverton and other plain
Jim
areas are at the lower end. However, watch those very high GRM's..sometimes
they're high because the rents were very very low...we know what the rents
should be and can prove it to you!
#2 Rule of Thumb
-
Price per square foot runs $90 to $280. Again, area style of property determines it.
#3 Rule of Thumb
-
All operating expenses and vacancy estimate average 30% of the gross income
on small plexes. Operating expenses do not include the mortgage payment or
professional management.
#4 Rule of Thumb
-
Low down deals do not produce positive cash flow in year one with fully
amortizing loans. Basically, you either make the required down payment at
closing, or you make it monthly, if you can qualify for the loan.
#5 Rule of Thumb
-
You have got to have email or a fax to get the chance to make an offer in
the very fast paced and popular sub-markets. I've been doing this for 32
years and am excited to see our sub-markets finally develop. Remember that commute?
You don't like it? Neither do tenants...which is why they pay higher rents
for the close in properties...in our opinion, close in
rents and values will only continue to rise!
#6 Rule of Thumb
-
The market rules! You can't change it, just understand it, and stop trying to
push rocks up hill.
-
The best and most efficient way to proceed is to find the area you want to
own in (be specific), and research the closed sales over the last three months to
determine what the market is for that specific area.
-
Then take these numbers ( the GRM and price per square foot) and apply them to
properties for sale in that same area to see which ones are properly priced.
-
Then take your financing scenario, apply it to one of the opportunities
using 30% for vacancy/credit loss and all operating expenses and see how it comes (pencils) out. If you constantly find
properties that don't pencil for you (and they are selling in that area), then you
either don't have enough money, don't know the market, or are not realistic in
your expectations.
-
If you don't have enough,
go find
a friend and go in it together to get started. After all your research,
you will know the market, and your friend will have confidence in your
suggestion of a joint venture. Also, if you get yourself pre-qualified for
a loan, your friend will know you can actually buy the property, and will be
happy to know someone "so together" to be in business with. Loan
pre-qualification is free, most of the time, sometimes it will cost you a
whopping $25.
Why not consider having your
IRA/ROTH/401k invest in real estate? Imaging the tax deferred growth potential!
Email me for detailed information on
specific areas.
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JL Lutz & Company
Realtors ® MrPlex.com
