The Eugene/Springfield area is a great market for rental houses. The University of Oregon has 20,000 students, most of whom are renters. There are also many people waiting to buy a house who are presently renting.
I grew up in the rental business in Eugene and continue to own rentals now. Rentals can be a great investment. At Bell Real Estate, we manage over 2,000 units in Eugene and Springfield, and the local rental market is good. The house I grew up in, in Eugene, was purchased by my parents for $19,000. It’s now worth $219,000. Wouldn’t you like to have 10 of those?
It is best to own investments that are cash neutral, meaning your rental income covers your expenses. You can be more aggressive (if you can get a sufficient Loan-to-Value) and inject cash on a regular basis (known as feeding the property or having an alligator), although I’m not a fan of this plan; it’s too easy to get into trouble and you may not have the money. An Excel spreadsheet to assist your rough calculations of cash-neutrality is here.
What are good features in a rental house?
First off, you’ll want one that’s easy to sell, should you want or need to unload the rental. So, my recommendations on what to look for in a rental are predicated on the idea of something that’s easy to get out of, as well as having desirable rental features.
Some areas of Eugene and Springfield are more desirable than others. Houses in more desirable areas will rent for more, and probably quicker, but all houses rent. Most investors have their own personal favorite areas, and they differ from one another.
Location is the only aspect of a house that can’t be fixed. Try to avoid busy streets. Busy streets knock ~10% off the price when it’s time to sell, and make for a less desirable rental.
Proximity to Schools
This cuts both ways, so I’m not sure it matters. Some love to be within walking distance to schools. Others dislike all the commotion connected with a school.
Three bedrooms, 2 baths is my favorite with between 1,200 to 1,600 square feet. These types of homes will appeal to the largest market, both in selling and renting, because they’re more affordable.
If you can get a roof that has a pitch of at least 3 inches every 12 inches, it is cheapest to re-roof when that time comes. Flatter roofs require membrane (more expensive) or metal (very expensive). Roofs > 2:12 will accept composite shingles, which are the cheapest option.
If you have a choice, total lot sizes of 4,000 to 5,000 square feet are probably best. If you have to re-landscape or water and mow while vacant, you’ll appreciate a smaller yard.
Most likely you won’t be paying for the heating and cooling in a rental house, but with high energy costs, a well-insulated home is a positive. Brands marked as Energy Star and Super Good Cents are good choices.
Newer homes have 2×6 exterior walls, which were mandated for their bigger cavity in which to stuff insulation. Older homes were framed with 2x4s, and while plenty strong, they aren’t as well insulated.
Modern Windows and Doors
This is a plus, but not a necessity. Well insulated double-glaze window and thermal doors can always be added, and wouldn’t affect my purchasing decision on a house.
Slab vs. Stem Wall
This is a matter of preference. I like the traditional stem-wall (foundation) and crawl space, but others prefer slab. Houses built with a slab don’t suffer from sub-floor dryrot, and are less prone to odor problems from pets. However, plumbing is frequently contained in the slab and if you need to fix a leak, it can be expensive. A non-slab floor is also more lively and easier on the feet.
Many know of the composite siding failures we had in the Northwest. Manufacturers such as LP and Weyerhaeuser had problems with their manufactured, wood-based products. Much of the defective siding has been replaced, but there’s still some out there. If you have the choice, cedar or Hardiplank make great siding options.
I would recommend avoiding houses with transite siding. This is an older asbestos containing product, which can be costly to re-do because of Hazmat considerations. It frequently looked like flat cedar shingles; when you tap on it with your fingernail, it doesn’t sound like wood, but rather like cement.
Fiberglass Tub Surrounds
These are the best system, especially when coupled with good quality sliding glass doors. They seem expensive; however they help keep shower water where it belongs, which in turn, minimizes dryrot. When the budget allows, install these. (You’ll thank me later.) Water is the enemy of buildings.
Insulated Garage Doors
These are a plus, but not a necessity. Non-insulated doors are single wall, and if you look at them the wrong way, they’ll dent and become ugly. It’s still possible to dent insulated doors, but not as easily. In my opinion, denting is not normal wear and tear and I have had dented panels replaced. If the budget allows, I have electric openers installed. Everyone loves them, and it’s a little easier on the door. They aren’t mandatory, however.
Well-functioning Gutters and Downspouts
In an area where rain is a regular occurrence, these are a necessity. Misdirected rain water will eat up your building. Gutters and downspouts are cheaper than fixing dryrot.
Major Systems: Plumbing, Wiring and HVAC
These are expensive to repair and replace. Modern, well-constructed systems are better.
Hot Water Heater Location
The best spot for a hot water heater is in the garage. All systems fail, and if the hot water tank does so catastrophically, the garage floor is the best place for all that water.
Non-painted cabinets, most likely have a clear finish on them, which is often lacquer. Lacquer doesn’t hold up well around water. When the finish starts to fail, re-do the failed areas with polyurethane, which lasts better around water.
Underground Oil Tanks
It’s best to avoid houses that have underground heating oil tanks. If the tank has leaked, it can be expensive to clean up.
Renting your property
Unless you’re going to make a career out of running your own properties, I recommend leaving management to the pros. There’s a lot to know about laws and regulations, plus property management isn’t that fun. Of course, I’d recommend that you use Bell Real Estate. I think they do as good of job managing for others as I do for myself! Having said that, I know some will persist in managing their own rentals, and here are some tips.
- Keep your rents reasonable. Houses that are a good value rent quicker.
- Keep the properties well maintained. No one likes to live in a dump.
- Clean properties rent faster. Paint is cheap.
- Treat your tenants well. They’re very important.
- Don’t let your tenants get behind more than a month in rent.
- Advertise your vacancies. Use The Register Guard classifieds, a yard sign and Craig’s List.
- Check the rental histories of your tenant. Call the second to the last person that rented to them. (The last person may say anything to get them out.)
- Call us if the above suggestions fail. 541-517-6543