Bend Real Estate Investment Archives - Page 3 of 5

Top 7 Reasons You Should Invest in Bend OR Real Estate

You have been thinking about investing in real estate for a while now but you don’t know where you should invest. Should you buy a rental in your home town? A college town? Why not invest in Bend real estate? Why not indeed? Here are our top seven reasons to buy a rental in Bend.

#7: You already vacation here. Owning a real estate investment in Bend could make part of your travel expenses to Bend tax deductible. Talk to your accountant.

#6: People want to live here regardless of the job market so finding tenants isn’t as dependent on the job market in Bend as it can be in other cities. Let’s face it, the job market in Bend isn’t the best in the state yet Bend’s population grew faster than all other areas of the state in 2011 and 2012.

#5: There is a large segment of the population in Bend that works in jobs related to tourism. Restaurants, golf courses, resorts, motels, breweries etc. These businesses are all a part of what makes Bend great but those jobs don’t always pay enough for someone to afford to buy a home. In our experience, service industry employees love to live in Bend where all the action is.

#4: 37% of the people who live in Bend rent the home they live in according to City-Data.com. That number is slightly higher than the national average and it appears that number will continue to grow as home ownership is at a 17 year low according to Reuters.

#3: Home prices are rising in Bend. The first quarter of this year was especially strong with the Bend real estate market out-pacing all but a few of the Metropolitan Statistical Areas (MSA) monitored by the Federal Housing Finance Agency.

#2: There is a lot of competition for rentals in Bend. This can be seen in Bend’s vacancy rates and our anecdotal evidence as a Bend property management company. According to a Survey conducted by the Central Oregon Rental Owners Association vacancy rates in Bend are at 2%.

…And the number one reason you should invest in Bend, Oregon real estate is:

Business Insider called Bend the best real estate market to be invested in for the next five years.

Real Estate Investing: Cash Reserves

Cash reserves are an important part of any real estate investment strategy. Not having enough cash reserves can mean the difference between a failed investment and a successful one that provides monthly income and long term growth. It is easy to assume (hope) that tenants will never move and nothing will ever break in your rental property but a wise investor can be prepared for whatever may come their way.

Surprises: How do you plan for a surprise? It is very tough to do because by definition a surprise is unexpected. It could be something as cheap and easy as a leaky faucet or as expensive as a leaky fridge that goes unnoticed and damages the flooring and sub-flooring. Either way, it can be tough to come up with the cash to fix surprises unless you have some set aside already.

Major Items: Things like a roof or paint or floor coverings are a little easier to plan for because they don’t usually fail over a 24 hour period. Even though you can see these big repairs coming it can still be tempting to ignore them until they become absolutely necessary. However, if you don’t have enough reserves for a repair that needs to be done NOW you can find yourself making substandard repairs as a stop-gap measure which can end up costing more in the long run.

Vacancies: Vacancies are usually pretty easy to see coming but it can be hard to know how long it will take to find a new tenant. Another kind of vacancy that can be tough to see coming is the one where the house is still occupied but the tenant has stopped paying rent. Not having enough cash reserves to get through a vacancy can lead to bad decisions by an investor. A real estate investor who feels financial pressure to get the income flowing again might be tempted to accept a poorly qualified tenant. Having cash reserves can allow your to take your time and find a good tenant.

How much do you need? If you will be financing the rental property with a conventional loan, lenders will generally require two months reserves of principal, interest, taxes and insurance (piti) for each of the first four investment properties. If you have five to 10 properties they will require six months of reserves for each property. So if you have three investment properties and the monthly piti payment is $800 for each, the lender will require you to have $4800.00 cash reserves. Once the loan closes it is pretty much up to the borrower to decide if that money is kept as reserves.

There is no standard formula for how much money investors should set aside as reserves. What it really boils down to is each investor needs to decide what they are comfortable with. Do you have enough disposable income each month from your day job to cover lost income from vacancies or a tenant who decides not to pay rent? Do you have enough reserves that you won’t lie awake at night wondering what might break next and how you are going to come up with the money to fix it?

Real Estate Investing: Types of Residential Rentals

No matter what, people always need a place to live and that is a big part of the reason that rental properties make such an attractive investment. Here are some things to consider when choosing what type of rental property to buy in Bend.

Single Family: Houses are perhaps the most common real estate investment in Bend and often the first type of property new investors buy. They are familiar to most people because most have owned or lived in a house at some point. A house is also usually less expensive than other types of rental properties making them available to more investors. There are houses of all shapes and sizes available in all parts of Bend so regardless of what kind of house you are looking for there are plenty to choose from. The number of houses for sale in Bend means that finding others to compare to in determining value, income potential and potential ease of sale is relatively easy. Houses are the easiest real estate investment to sell because the number of prospective buyers isn’t limited to investors but also includes home owners. Most real estate investors are able to finance rental houses with a conventional mortgage and 25 percent down payment.

Small Multi-Family (two to four units): Most often known as duplexes, triplexes and fourplexes they are called multi-family properties because there is more than one dwelling unit in the same building. The cost of small multi-family buildings is higher than a single family house but not exponentially based on the number of units in the building. A vacant unit is easier to deal with financially because one unit accounts for a fraction of the income as opposed to 100% in a vacant house. Duplexes are the most common type of small multi-family property but finding comparables for these properties is more difficult than it is for houses and they are generally more difficult to sell than a house. Value is usually determined by the real estate market (similar properties) not the income they produce. These properties can be financed with a conventional mortgage and 25% down payment. They can also qualify as a primary residence for the owner if the owner chooses to live there.

Large Multi-Family (more than four units): Properties with five or more units most often come in the form of apartments. Prices for apartment buildings in Bend can range from $300,000 (fewer than 10 units) to millions of dollars (hundreds of units). Management can, at times, be a struggle with large multi-family properties and investors shouldn’t assume that just because there are more than ten units that the property will be able to support an on site manager. For investors with enough money, buying one apartment building as opposed to multiple houses can be advantageous in that you can have all of your rental units in one place so you don’t have to run all over town to collect rents or make repairs. Large multi-family properties can be tough to sell because of the small pool of potential buyers which means it can take much longer to get your cash out of this investment. As a commercial property these are usually valued by the amount of income they can produce which puts a premium on good management. They also require commercial financing which is much more complex than a conventional mortgage.

Each of these types of residential properties can be found in Bend and we look at each one as a rung on a ladder. Investing in residential real estate isn’t for everyone but if it is something you are considering then a great place to start is with a house and work your way up that ladder. If you don’t like owning a rental house then it is relatively easy to get out and invest in something else. If you do like it then that next rung doesn’t seem like such a giant leap.

Bend Oregon Vacancy Rates Falling According to Survey

The Central Oregon Rental Owners Association (COROA) 2013 annual rental survey has been released documenting a snapshot of rental activity for houses, duplexes, triplexes/fourplexes and apartments for Bend, Redmond and all of Central Oregon.

The survey data is provided by rental owners and property managers from Sunriver to Prineville, La Pine to Redmond and Bend to Sisters. While it covers all of Central Oregon the data has not been verified so some of it may be inaccurate. Another thing to keep in mind when reviewing the survey, especially for rental houses, is that all like kind properties have been lumped together. In Bend, for example, where the data shows average rent for a 3 bedroom house in Bend the number includes all three bedroom homes whether they have one bathroom or two and a half. It also does not care where the rental house is located. Rental houses in neighborhoods where homes usually rent for a dollar a square foot are averaged in with those that rent for 50 cents/foot.

Despite the non-scientific nature of the survey it does provide some insight into trends in the Central Oregon Rental Market. The first thing that jumped out at me in this year’s survey was the vacancy rates in Bend and Redmond. In Bend, the vacancy rate for single family homes was two percent and in Redmond it was zero. At the time of the survey last year the vacancy rate in Bend was 4.2 percent and in Redmond it was 4.5 percent. Keep in mind this is a snapshot of a single point in time but those numbers are pretty amazing and also reflect what we have been seeing in the properties we manage.

The second piece of information that drew my attention was average rents. At first glance rents in apartments (5 units or more) and multi-family properties (2 – 4) units are up across the board. So it would seem that rents would also be up for houses, right? That has been our experience. The problem is, manufactured homes were included with stick built houses this year so comparing the 2013 survey to 2012 is pretty much useless where average rent is concerned. What I can tell you is, over the last two years each time a tenant has moved out of a property we manage we have raised the rent and not had any problems finding a tenant in less than 30 days.

If you are considering investing in the Bend, Oregon real estate market and have questions about the rental market in Bend please feel free to send us an email or call us at (541) 508-2930. Read more about our Bend Oregon Property Management Services

Foreclosures are Still a Big Part of the Real Estate Market

Foreclosure inventory rose in the first quarter of 2013 — Courtesy RealtyTrac

Foreclosed homes. Bank owned homes. Remember them? They aren’t talked about as much any more but they are still out there and they still have the ability to affect the real estate market.

Search for bank owned homes in Bend, OR

RealtyTrac’s first quarter analysis of foreclosure inventory shows that there are still 1.5 million properties actively in the foreclosure process or bank owned. For some historical perspective that is 9 percent more than there were at this time last year and about as many as there were in April 2008.

Many of these foreclosed homes are being bought up by institutional investors and turned into rentals. There is ample opportunity for individual real estate investors to do the same or even flip these foreclosed homes. The RealtyTrac report brings to light some points of information that could prove valuable to investors going forward.

In Oregon, more than half of all homes in the foreclosure process are vacant. These are homes that are not yet bank owned and could still be sold as short sales. While homes left vacant for a long time are more likely to need repairs this is not necessarily a bad thing for an investor. Whether the goal is to flip the house or turn it into a rental homes needing repairs often provide better returns because they sell at more steeply discounted prices yet once the repairs are complete these homes will rent for the same amount and/or sell for the same price as other homes not in foreclosure or short sale.

Shadow inventory rose 12 percent compared to the first quarter 2012. Homes that have started the foreclosure process but have not yet been listed in the market are considered shadow inventory. “Many of these properties will be listed for sale as short sales in the next six to 12 months, or go through the foreclosure process and eventually be listed for sale as bank owned in the next 12 to 18 months,” according to the report. This is good news for investors as it should provide more inventory of homes for sale thereby reducing competition. It should also provide homes selling or at least listed at a discount to the rest of the real estate market.

The number of old homes in foreclosure is rising. About a third of the foreclosure inventory as of the first quarter 2013 was built before 1960 which is 11 percent more than a year ago. Watch out for homes built before 1960. Regulations for everything were different back then and something as seemingly simple as the kind of paint or insulation used could add thousands of dollars to the ultimate cost of a home. Investors considering flipping or renting houses this old would be wise to pay for a professional inspection.

House Flipping: Anti-Flipping Rule Suspended Through 2014

The real estate investment strategy of flipping houses recently received good news in the form of the FHA continuing the suspension of their anti-flipping rule through December 2014.

The rule, originally enacted in 2003, was written to curb the practice of flipping houses by preventing the FHA from insuring mortgage loans on homes that were bought and then sold again within 90 days. The thinking was that there was a lot of “predatory” flipping happening often involving collusion with lenders and appraisers which was resulting in homes with artificially inflated values.

After the real estate bubble burst the FHA first suspended this rule in 2010 in an effort to reduce the excess inventory of homes, especially foreclosures. Many of those foreclosed homes were also in need of at least some level of rehabilitation which made them great candidates for flipping. Since the first suspension of the anti-flipping rule it has been extended three times including this most recent extension.

The FHA press release says, in part: “Through the regulatory waiver, FHA encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes, with the objective of increasing the availability of affordable homes for first-time and other purchasers, helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties.”

The obvious benefit of this continued suspension for flippers is access to buyers. By some estimates the FHA finances as much as 50 percent of all purchases made by first time home buyers. According to the National Association of Realtors® first time home buyers accounted for 39 percent of all home purchases in 2012. That is not an insignificant number of home buyers.

The other thing that is significant for investors is the potential to reduce carrying time and costs. The potential to reduce the amount of time a house is held can put thousands of dollars in the pocket of a real estate investor through reduced carrying expenses and by allowing them to possibly flip more houses in a given period of time.

Looking for a house to flip? Search Bend Oregon MLS

Property Management: Rental Market in Bend Still Strong

The strong rental market in Bend, Oregon continues to pay real estate investors well with rising rents, low vacancy rates and solid appreciation. The Central Oregon rental market has been getting stronger for the last couple years but it’s not too late for investors to take advantage of today’s market conditions.

Read about continued strength in the rental market for Bend real estate investors as of October 2013

Demand is strong. Would be first time home buyers are still having problems buying homes. For the past few years the problem for home buyers who aren’t well qualified has been tight lending standards. While lending guidelines are still pretty strict, they have loosened some over the last year. Although it has become a little easier to qualify for a mortgage, rising home prices have countered that by pricing some out of the market. Also adding to demand for rentals is the number of people moving to Bend. I would estimate that a third of the calls that we have received for rentals this Spring are from people moving to Bend.

Rents are still rising. With such strong demand for rentals we are raising rents, on average 5%, each time a lease expires. Despite the rising rents we aren’t having any problems finding good tenants. In fact, we are getting multiple applications for most homes.

No lengthy vacancies. Our rentals are being occupied as fast as we can get one tenant out and the next one in. In most cases that means the house is vacant just long enough to clean the carpets and let them dry.

This is a great time to be a real estate investor in Bend. Whether you already own a rental home or are looking to buy one, Preferred Residential is uniquely qualified to help investors maximize return on investment in the Bend real estate market. From purchase to property management to sale we are a full service real estate company and we’re just an email or phone call away at (541) 508-2930. Read more about the Bend Oregon Property Management Services we offer.

House Flipping: Get an Inspection

When house prices are rising flipping houses becomes more popular to investors. Lately at Preferred Residential we are seeing more real estate investors coming into the real estate market with the intent of flipping. House flipping is defined as buying and selling a property within a six month period.

There are some inherent dangers in flipping houses and one of those is not being exactly sure about what surprises might be lurking in the house you buy. Houses requiring unexpected repairs can throw a wrench in the timeline and the pocketbook leading to reduced profits or even losses.

A good way to avoid losing money is to have the home you are thinking about buying professionally inspected. Pay for a professional inspection? That is heresy to many investors who flip houses. Why pay $500 when “I know houses and if I waive the inspection contingency it will make my offer look much more attractive to the seller?”

The answer is: Because you don’t know everything about houses and even something as readily visible as stucco siding can ruin a flip. We just had buyers in a multiple offer situation NOT waive an inspection and boy are they thankful now. The inspection found some issues in the stucco siding which made the buyers ask more questions. After some research we found that the siding process used was extremely rare and three different siding contractors told the buyers they didn’t even know how to get it off the house.

Think of it from a return on investment perspective. A thorough inspection can save a person flipping houses thousands of dollars. It can mean the difference between a profitable flip and one that puts you out of the house flipping business.

Median Home Price Just One Indicator of Market Strength in Bend

How important is median price when it comes to determining the value of your home? The answer is: Not at all. It is a good indicator of what is happening in the real estate market as a whole but not for your house specifically. For most people a short article in the Bend Bulletin about how the median price of homes sold rose 15% in March would be cause for celebration. I’m sure there were a number of people running around their houses this morning saying, “Honey, the price of our house went up 15% last month!!” The problem is, we tend to think of median price as the average price when more often than not it is anything but average.

Median price is just the middle price of however many homes have sold. If 100 homes sold in a given period with prices ranging from $150,000 to $850,000 the median price would not be $500,000. This is a bit of oversimplification but to determine the median put the price of each home that sold on a line going from lowest to highest. Draw a line in the middle so there are 50 numbers on each side of the line. The number that falls in the middle where they were divided is the median. So if the median price is $271,000 it would mean that half of the homes sold for less than that amount and the other half sold for more.

It just so happens that $271,000 was the median price of homes sold in Bend during the month of March (2013). While the aforementioned one month improvement of 15% is quite a gain it would be unwise to assume that all homes in Bend gained that much value. There are a few factors that make median home price a less than reliable or accurate indicator in today’s real estate market.

One of those factors is inventory which has been an issue in Bend and Central Oregon for more than a year. Low inventory keeps the number of sales lower than they would otherwise be. When the number of sales in a real estate market is low, the median price tends to be less reliable because it can go up or down very quickly with just a few sales.

The kind of homes that are selling also plays a role in determining median home price. Bend is unique in that there are a wide range of homes to meet the needs of many different kinds of home owners. We see people buying homes not just to live in but as investments (rentals), second homes, future retirement homes and vacation homes. Vacation and second home owners make up a larger percentage of owners here than in most markets and they aren’t necessarily interested in the same kinds of homes as those who live here full time.

Another thing to keep in mind where median price is concerned is the sample. In other words, is the median price based on sales for the whole county, the city or just a neighborhood? While the house you own or are thinking about buying may be located in Deschutes County and Bend, Oregon the neighborhood where you live will have a much smaller sample. Therefore things like how recently the homes were built, the school district, distance to restaurants and shopping and overall desirability will play a larger role in determining median price.

If your goal is to figure out what the value of your home might be, median price is not the place to start. It can help us understand the real estate market as a whole but a Current Market Analysis from your favorite real estate agent will provide a much more accurate valuation. The sales used by your agent will be from homes that are similar in size, year built, improvements and are close in proximity to your home. Sales used to determine median price are all inclusive meaning median price doesn’t discriminate between young and old, mountain views or train tracks. You might be surprised by the value of your home like some clients were today when they found out their home was worth $200,000 instead of the $160,000 they thought it could sell for. Call us today at (541) 508-2930.

Do Investors Need a Real Estate Agent?

I think if you asked 10 real estate investors at least eight of them would say they don't need a real estate agent to be successful. Investors are a proud group with an entrepreneurial spirit who like to do things on their own but the smart ones also know there is value to be found in a good real estate agent that focuses on investing.

Local Market Knowledge. Good real estate investors often venture outside their home markets in search of a good deal. The challenge for these investors is to know what neighborhoods fit their business model, what prices make sense in those neighborhoods and what rents can be charged. What is the best way to get that information? Not from Zillow or Trulia. Those sites often have information that is out of date or just plain wrong. The best way to get accurate, local, real estate information is from a real estate agent who understands investing.

Teamwork. A good real estate investment broker wants to work with the investor beyond the sale and see them be successful with each property they buy. It is important that an investor's agent listen to and understand the goals, needs and strategy so that they can work WITH the investor to be successful. An agent who "gets" what the investor is looking for can also save time by only presenting deals that fit "the plan."

Lease, manage, market and sell. Most real estate investors that I know are always looking for the next deal. That means they don't have time to deal with finding great tenants and managing their properties the way a Bend Oregon Property Management Company can. And when it comes time to sell, just show me the money!

For an investor, finding the right real estate agent can save time and headaches. The right real estate professional can also present investment opportunities that might otherwise be missed. Preferred Residential is uniquely positioned in the Bend and Central Oregon real estate markets to maximize return on investment. Call us today at (541) 306-3654 to find out how much value a responsive, connected, real estate agent can add to your investment strategy.