Portland’s New Class Of Income Properties
Finding a property in Portland that cash-flows has not been an easy task over the last couple of years. Even as home prices started to decline, the efforts of many would-be rental property investors were thwarted by higher vacancy rates and lower rents. The fact that the widely anticipated wave of distressed commercial real estate opportunities doesn’t seem to be materializing anytime soon would seem to suggest that a profitable investment in a duplex, triplex or small apartment is likely to remain an elusive endeavor.
Nonetheless the economic downturn has created opportunity in the rental market. When faced with job-losses, furloughs and wage cuts, many renters – particularly the entry level segment – have doubled up.
The Comeback Of Shared Housing in Portland
This trend is quietly leading to somewhat of a revival of the shared-living concept. To keep their housing costs down, an increasing number of renters are willing to share a bath and various other amenities, previously considered private. In several parts of the nation this trend is already in the advanced stage. Take Florida for instance, where a University of Florida survey last May concluded that:
The decline in consumer spending is finally beginning to show up in rental markets. Either people are becoming increasingly cautious or they have already been impacted by declining real estate sales or the state budget cuts. The biggest surprise is how notable the downturn in the state of the apartment market appears to be. It could be that people are trying to save money by doubling up and sharing accommodations with roommates, reducing the demand for apartments.
Perhaps more so than elsewhere, this trend is likely to take root in Portland, where an above-average share of unemployed and underemployed is forced to seek affordable housing solutions beyond conventional apartments.
The Return Of Previously Unrentable Space
Increasingly these affordable housing solutions can be found at spaces that were previously unrentable or at the very least undesirable. When things were going well, apartment amenities and views were key decision factors. Now that cost is paramount, renters have become less discerning. If the price is right, a 300 SQFT room without a view and a shared bathroom will do. Looking out onto a convenience store might conceivably be perceived a good thing and having a bust stop in front of your door-step certainly makes commuting to that part-time gig a whole lot easier.
A New Market For Large, Old Single Family Homes
This “move down the housing chain” creates opportunity to re-position a type of housing product that has fallen from grace among home-buyers: large, old, single family homes with unconventional floor-plans. Portland, particularly the east-side has a substantial number of these kinds of homes, many of which have become an increasingly tough sell as today’s buyers are no longer prepared to ignore quirky floor-plans and odd-sized rooms just to get on to the real estate bandwagon. As a result, this product has been discounted more heavily than the rest.
However, since renting a room – especially an unconventional space – is typically less expensive than apartment unit of comparable size, rental demand for this kind of product is expected to grow, arguably creating an income product with better fundamentals than many a duplex in town.
