Robert, if you want to invest in Bend, you have to work the cycles, keep more equity, buy for value.
You aren’t going to get any cash flow. Back when the mill shacks on the Westside sold for $20,000 they were renting for $75. So no cash flow even back then, but don’t you wish now that you’d bought a dozen of them at $20,000 and still owned them today.
If you go to fly-over country and buy something that gives you $100 a month, that is all you’ll ever get. Prices haven’t appreciated for 20 years and probably won’t appreciate for the next 20 years (which means you are losing value, adjusted for inflation).
In Bend, investing is a bit like surfing: you have to start paddling before the wave gets there.
I’m living on my rent money. How’s that possible when there is no cash flow? You have to keep more equity in a property.
Here’s how it works in Bend, very overly simplified version. Your figures will vary and it will take you longer to build your equity up to this point:
I find a house worth $300,000 that I can buy for $200,000. I put $100,000 down, and borrow $100,000. The tenant barely makes the mortgage payment, but at least I am not paying the mortgage.
Then I sell the house for $300,000, and I pay off the mortgage and walk away with $200,000 cash.
I find another house worth $300,000 thatI can buy for $200,000. I pay all cash for it. It cash flows.
I sell it and walk away with $300,000 in cash.
I buy 2 house worth $300,000 for $200,000 each. I pay all cash for one, and I put $100,000 down on the second. The first one cash flows and the second pays it’s mortgage.
I sell the first one and I have $300,000 cash. I buy two house, as above, all cash for one and $100,000 down on the other.
I sell the second house. I pay off the mortgage, and I have $200,000 cash. I use that to pay all cash for the nexrt house, which will give me cash flow. I sell that one and buy 2 more, 1 for all cash and one that makes it’s mortgage payments.
You might have to start with smaller cash amounts while you build it up. You have to have a way to support the first purchase or two.
It is not that easy to find a house with $100,000 instant equity, so you don’t buy and sell all that often-- but if you hold over 1 year, there are really nice tax advantages.
It’s really easy to find a house with $30,000 equity. The numbers work the same. It will just take you a couple of transactions before you have $100,000 cash to work with.
In this market, sellers are scared, so you should be abe to purchase larger amounts of equity.
If you like to gamble a bit and can buy and hold (and it is a gamble), I keep one in Romaine Villiage, right on the edge where it is outside the HOA. You can’t currently place a frame house on those, but there are rumblings about changing it. I think when the Winco Center goes in and the parks are in, the restriction will be lifted.
In the meantime, my little old mobile in there gives me an income. If the change goes through that allows frame bult, I will make a killing. If not, it has gone up in value nicely, anyway. That one is my big gamble. Normally, I don’t gamble. I am very conservative with my money.
I am waiting to see what the market does. If it takes a tank, it is time to buy, because it is a normal cycle for this area. So you buy on the way down, and then you wait patiently.
If you are doing buy and hold, never buy anything just because it is cheap. Buy properties with solid value and you will weather the cycles much easier. If you have to settle for less equity to get mountain views, you will still be better off in the long run.
If the market is going up, you can buy cheap properties and then get them out of your ownership BEFORE the market tops out and starts down again. The less desirable properties lose value first, ;ose it quicker, and lose a lot more percentage of value than the desirable properties.