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Oregon Rent Control Law Informational Presentation 2019 - Zoe York, MAI

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Zoe York, MAI Appraiser, discusses what Oregon's rental control Senate Bill 608 could mean for the value of your multi-family property.

Disclaimer: This presentation is meant to answer general, broad questions about the changes to Oregon Rent Control Senate Bill 608 (“SB 608”). Landlords should consult with an attorney before taking any action as it relates to End of Tenancy/Non-Renewal Notices and/or increasing rent. All opinions are my own. These statements are not meant to be taken as investment advice.

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Oregon Rent Control Law Informational Presentation 2019 - Zoe York, MAI

  1. 1. Zoe R. York, MAI 260 West 12th Avenue, Eugene, OR 97401 (541) 687-1938 / (541) 683-0932 zoe@duncanbrown.com www.duncanbrown.com Rene’ Nelson, CCIM, CRE 895 Country Club Rd, Eugene, OR 97401 (541) 912-6583 rene@1031guru.com www.eugene-commercial.com Rachel McLaughlin Exchange Facilitator Cascade Title Company 800 Willamette Street, Eugene, OR 97401 (541) 687-2233 rmclaughlin@cascadetitle.com www.cascadetitle.com Brian Cox Real Estate & Property Mgmt Attorney Brian Cox Law Offices 142 W 8th Avenue, Eugene, OR 97401 (541) 683-7151 bcox@coxassociates.info www.briancoxeugeneattorney.com
  2. 2. Zoe York, MAI Appraiser Commercial Real Estate Appraiser Duncan & Brown Appraisal Services
  3. 3. Demand Overview – Multi-Family Eugene-Springfield 2018 Co-Star Rent/Unit Springfield Co-Star Rent/Unit Eugene  Rents trending upward since 2013- 14  Springfield rent increases in range of 30%-40%.  Eugene rent increases in range of 20% to 30%.  Gap closing between Eugene/Springfield rent levels given limited supply and high demand  Average rent levels Eugene v. Springfield also impacted by % of new units in the data set: less new unit construction in Springfield compared to Eugene.  Average increases over time less than 5% per year.
  4. 4. 2-4 Unit Income Approach Rent Multipliers (GRM/GIM) GRM (Monthly Factor) – Appraisal Practice Gross Rent (Monthly) x GRM (Gross Rent Multiplier) = Value GIM (Annual Factor) – MLS Calculations / Brokers Gross Rent (Annually) x GIM = Value EXAMPLE: Duplex: $800/unit rent = $1,600 Gross Monthly Rent and $19,200 Annually GRM: 150 Value: $1,600 x 150 = $240,000 GIM: 12.5 Value: $19,200 x 12.5 = $240,000
  5. 5. 2 to 4 Units-Value Change Trends Over Time:  Early 2007 GRM’s were 170 to 190 (14-16)  Late 2010-12 GRM’s were 125 to 140 (10-12)  Late 2017-2019 GRM’s are 140-165+ (12-14) *market v. below market impacts How Changes in Variables Impact Value: EXTRACTING GRM’s AND GIM’s FROM MARKET Sample Property Sold for $250,000 - duplex -Current Rent of Sale Property $1,600/ month, $19,200/year (Extracted GRM = 156, GIM = 13) -Market Rent of Sale Property $2,000/month, $24,000/year (Extracted GRM = 125, GIM = 10.5)
  6. 6. What Could Rent Control Mean for Your Value? Subject In-Place Rents: $20,000/year (substantially below market) Market Rents: $25,000/year *Potential for limited investor perceived upside, rents will likely be analyzed as current, not set at market 2017-2018 Trends: $25,000 x 10.5 = $260,000. Reflects upside. Potential Impacts: $20,000 x 10.5*= $210,000. No more upside. *Example Shows Extremes, GRMs/GIMS will be driven by the market
  7. 7. Timing of Change • Changes dictated by market reactions. Lag of actual change versus observed impacts. • Will there be added supply due to investor portfolio changes? • Will there be added risk PERCEIVED in the market? • Primary risk for projects 10% or more below market. • Actual long term rental increase trend less than 5% per year on average. Long term holds can catch up with good management.
  8. 8. Where Do I Go Now? Visit Rene’s Website For Latest Information… Oregon Rent Control Center www.eugenecommercial.com
  9. 9. For further information: Zoe York – zoe@duncanbrown.com (541) 687-1938 Rene’ Nelson – rene@1031guru.com (541) 912-6583 Rachel McLaughlin – rmclaughlin@cascadetitle.com (541) 687-2233 Brian Cox – bcox@coxassociates.info (541) 683-7151

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