I just signed a lease with a tenant for our rental condo! This is great news because the unit has been vacant since November. The extended vacancy really sucks. We had this condo since 2011 and this was the longest vacancy we’ve seen yet. The previous longest vacancy was just 25 days. Winter is a terrible time to look for renters or buyers. We also had a tough time finding a tenant because there is a building under construction next door. Many prospective tenants don’t work regular hours and they didn’t want to deal with construction noise.
It worked out for the best, though. I have a good feeling about our new tenant. She has been in the workforce for awhile and seems to have it together. Our condo is right next to a college campus so I’ve been showing the unit to many students. I like students, but older renters with stable jobs tend to be easier tenants. College students aren’t going to stay long. They have many changes ahead of them. Our new renter may turn into a buyer too so this might work out for everyone. Anyway, I’m very happy our condo is rented out. Today, I’ll tell you a bit more about our rental condo investment. Our complex has a pretty interesting history. After that, I’ll share how the investment is working out.
Our complex has 3 almost identical towers that were built in 1965. One of these 3 was the tallest building in Portland for about 4 years. That’s pretty neat. These buildings and the historic Halprin Open Space Sequence were part of the first urban renewal project in Portland. Back then, cities were falling into decline and residents were moving to the new suburbs. This area south of downtown was a Jewish and immigrant neighborhood. The city condemned 54 blocks for redevelopment and relocated more than 1,500 residents. Here is an aerial picture of what the area looked like in 1935.
By 1964, most of the buildings were razed. This image below is looking north. If you’re familiar with Portland, you can see the old US 99W freeway on the right edge of the picture. Traffic was rerouted to the I-5 across the river in the 70s. The Tom McCall Waterfront Park replaced the old freeway.
Our buildings went up in 1965. This image is looking west.
Our complex was built as apartments and they stayed that way until the real estate bubble in 2006. A developer purchased the complex and renovated them. Two towers were turned into condos in 2006 and 2007. The last one didn’t finish renovation until 2008, but the real estate bubble had popped by then. The last tower was turned into an apartment complex presumably because nobody was buying in 2008. Many units in the 2 earlier buildings were foreclosed or turned into short sales.
Purchased in 2011
Previously, I haven’t talked much about this condo because we co-own this unit with my brother. This condo wasn’t meant to be a rental when we purchased it in 2011. We were hoping my parents could live in this unit. They had just moved back to the United States after living in Thailand for 10 years. We lived in the next building so it would be very convenient for everyone. However, my dad didn’t like living in the US and moved back to Thailand. My mom stayed in the US and she didn’t want to live alone. She preferred to live with her kids. She lived with us in the summer when the weather was nice and went to stay with my brother in California in the winter. Now that she’s older and needs more help, she is staying with us full time. Moving back and forth caused minor anxiety and confusion. This problem is not severe at this time, but she prefers to stay put in one place.
Anyway, we purchased the condo in 2011 as a short sale. This was at the bottom of the financial crisis and we got a pretty good price on the unit. The purchase price was $140,000. It was a significant discount from the previous transaction. The condo was sold for $240,000 when they finished renovation in 2006. Today, the condo is worth around $270,000.
Unfortunately, this building hasn’t seen as much appreciation as the other condos in Portland. I guess it is because of the age. We love living here, though. It’s less noisy here than the rest of downtown and it is still very close to everything. We can walk, bike, or take the streetcars almost anywhere. The only major drawback is that we don’t have a washer/dryer in our unit. Residents need to go down to the basement to do laundry. Also, the HOA fee is pretty high.
Turned into a rental condo
After my dad moved back to Thailand, we turned the condo into a rental. In 2011, we rented it for $1,075 per month. Now, the rent is $1,350 per month. This is the market rate for our building. Other units around this area charge 10-20% more rent because they are newer. You can see more detail about our rental income at my Passive Income page.
Unfortunately, our rental condo has negative cash flow even with $1,350/month rental income. The HOA fee and property tax has increased over the last few years.
Rental income: $1,350
- HOA: -$505
- Property tax: -$360
- Mortgage: -$570. (We probably should have refinanced the unit to bring the rate down. Our current rate is 5.25%. We talked about it, but we kept putting it off because we were going to put it up for sale. It looks like the mortgage would reduce by about $100 if we refinance.)
This means our cash flow is -$85 per month. We co own this unit with my brother so it’s really not too bad at -$42.50 per month each.
I think the Portland real estate market is expensive at this point. The price probably won’t appreciate that much over the next few years. That’s why I put it up for sale at the same time I put it up for rent. Unfortunately, our unit overlooks a new building under construction next door so we haven’t had much interest from buyers. We should have better luck with selling it once the building next door is completed. These new apartments will be more expensive to rent and probably smaller than our condo. There are 4 high rises going up in our neighborhood. I guess it is fine as long as people are still moving to Portland.
Anyway, we’ll put the unit up for sale again when we get a vacancy. I hope our new renter stays at least a couple of years. The building next door will be done by then.
I’m about ready to cash out and move the money to RealtyShares. Real estate crowdfunding is a lot more passive than being a landlord. That’s okay. I can be a landlord for a couple more years. This unit isn’t that much work because there are only a few appliances inside. The HOA fee takes care of everything outside the unit. It is only a lot of work when there is a turn over.
Alright, I hope you enjoyed reading about our condo. The cash flow isn’t great, but we should make a nice profit once we sell the unit. Hopefully, the housing market stays steady for a few more years. Let me know if you have any questions.
*Late breaking update – Ugh! The prospective renter backed out on the lease. There is a family issue so she can’t move at this time. Oh well, I’ll put the condo back up for rent. I’m bummed out.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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