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Level One Research
Level One Research is what I call the very preliminary stuff. To do it, you don’t even
have to leave your house. This is research you do before you even set foot on a property, or
in the case of the true story of our acquisition of the waterfront property in Portland, Oregon,
before we even set foot in the town. You should know we didn’t just pick Portland out of a
hat. Before we settled on Portland, our goal was to do Level One Research on all the major
markets in the Western United States. It was time to expand our company’s reach, and the
question was where to go. One of the first things we did was look at all the newspapers and
business journal newspapers in every major Western city via the Internet. We followed the
online hyperlinks to every interesting lead.
For example, we’d type in a city like Denver into a search engine and up would pop a
story about population growth. We’d follow it. Then as part of that story there’d be a link
about school funding. We’d follow it. What we found was very interesting, particularly in
Portland. First we discovered that the city has an urban growth boundary that we felt would
limit the supply of rental property in the future. That’s a good thing! Next we found that the
city of Portland was progressive in their downtown planning and progressive in terms of
transportation with their light rail, bus system, taxi system, streetcar system, and even plans
for a future water taxi on the Willamette River. We also found that living and working
downtown was in high demand and that the downtown employment picture was favorable.
We were beginning to get our picture of the market. It was looking good.
Then we started to uncover some of the city’s limitations. On the downside we found
statewide unemployment was leading the country with a whopping 8.1 percent. This was an
important finding because when we saw that statewide number compared to unemployment
in downtown Portland, we knew for us the only opportunity was downtown or possibly a
few other suburban bright spots. Furthermore, downtown was mostly all built out and had
even greater supply restrictions than the rest of the metro area. Our job was not going to be
easy.
We found out this information in less than a day all from my desk in Phoenix, Arizona.
Although there were some negatives about the market, overall we were pleasantly surprised
and impressed with Portland. It was nothing like we expected it to be. We thought it would
be a place with major corporate layoffs, a place plagued by downturns in the logging
industry and agriculture, and one that was especially hard hit by other economic woes
including declines in the stock market and the aftereffects of the 9/11 tragedy, which had
happened just four months earlier. Our preconception of the area was based on the broad
brushstrokes painted by the media and, boy, were we wrong.
We saw Portland as a progressive city that was concerned about the quality of life and
that had long-term plans for building a wonderful community for today and tomorrow. We
also found that downtown Portland was one of the least affordable places to live in the
Northwest.
Portland was a mixed bag, but the negatives didn’t scare us. In real estate, you’ve heard
the saying buy low and sell high. In most cases the opportunities to buy low are when the
economy is down and the press is making a living by saying bad things about you. That was
Portland.
The point here is not to sell you on Portland, but to tell you that we would have never
known any of this unless we decided to do Level One Research in that area. We would have
never found out that downtown Portland was a market with good employment, that it was
progressive and forward-thinking, that it had a very high cost of home ownership, and that it
was in high demand. This was all good news for rental property investment, contrary to the
picture the media painted.
We knew it was worthy of a site visit.