Portland Triplex Case Study | 2014 Portland Real Estate Market Report

by | Mar 24, 2014 | How to Guides, Market Reports, Video

http://www.youtube.com/watch?v=a46FO6DrKL0

Portland Triplex Case Study 

To illustrate the value of investing in real estate I’m going to share a story of a triplex I own in North Portland. I’m also including the actual APOD [Annual Property Operating Data] Please note that the APOD is from 2012 and I have since increased rents and repairs and taxes are now lower. I bought this property from a bank at the bottom of the market for $235,000 with broken windows, graffiti and more! I expected it to cost $25,000 to repair but costs were closer to $60,000. Work was completed right before Thanksgiving and lease up took three months with rents being lower than expected due to the slowness of the season. Even though it cost more to repair, took longer to get ready, and rented for less than expected it still makes money. Currently after all expenses are paid it makes about $1,000 a month net. I have a $198,000 loan at 4.25% so I have an actual investment of roughly $90,000 in the property which is worth around $300,000 today.

I am projecting this property will yield 8.65% per year which is hard to beat when considering the tax advantages of real estate.

In 30 years if property keeps appreciating at 3% a year the triplex will be worth $728,000. The tenants will also have paid off the loan completely by that point.

$12,000 a year in net rents will be a total of $360,000 in 30 years assuming expenses go up at the same rate as rent but in reality rents will outpace expenses. In 30 years my $90,000 investment will yield $1,088,000 which is 8.65% compounding. This also assumes I don’t reinvest any of the $360,000 in rental income which will be enough to buy another property in 8 years, and again in 10 years after that.

To download and view the entire 2014 Portland Real Estate Market Report, click here.

Purchase Price

 

$286,000

Down Payment

$88,000.00

 POTENTIAL RENTAL INCOME

 

$36,540

Loan Amount

$198,000.00

 Less: Vacancy & Cr. Losses

5%

$1,827

Interest Rate

4.250%

 EFFECTIVE RENTAL INCOME

 

$35,340

Term

30

 Plus:  Other Income (collectable)
 GROSS OPERATING INCOME

 

$35,340

 OPERATING EXPENSES:
 Real Estate Taxes

$6,050

 Personal Property  Taxes
 Property Insurance

$750

 Off Site Management

8%

$2,827

 Payroll
 Expenses/Benefits
 Taxes/Worker’s Compensation
 Repairs and Maintenance

2.5%

$884

 Utilities:

$360

Garbage

$720

Water & Sewer

$1,500

Mis. / Reserves
Accounting and Legal
Licenses/Permits
Advertising
Supplies
Miscellaneous Contract Services: yard

$1,200

 TOTAL OPERATING EXPENSES

$14,291

 NET OPERATING INCOME

 

$21,049

 Less: Annual Debt Service

$11,688

 CASH FLOW BEFORE TAXES

$9,361

CAP Rate

7.36%

Cash on Cash

10.64%

GRM: Gross Rent Multiplier

7.8

 

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