Invest locally in Seattle, out of state, or something else?

[Wayne Lee]

I'm a first-time investor based in Seattle with about $80k cash to spend on a buy and hold rental property. The Seattle real estate market seems like a tough one to break into. Other locations or options I've considered so far:

• Searching further out but within a 3 hour radius from Seattle
• The Quad Cities (Iowa/Illinois), where I lived for a few years
• Cincinnati, where I have in-laws
• Turnkey investing (through RP Capital)

What would you do in my situation?

[Julien Jeannot]

@Account Closed

In any market, here's what I keep in mind as I manage my portfolio's risk:

1. Diversification:
• Diversify your real estate portfolio across different property types, locations, and markets. This can help spread risk and minimize the impact of a decline in any particular segment.
2. Market Research:
• Stay informed about local and national real estate trends. Understand the factors influencing the market, such as job growth, economic indicators, and population trends. This information can guide your investment decisions.
3. Cash Flow Management:
• Ensure your properties generate positive cash flow. Even in a declining market, properties with strong cash flow are more likely to weather the storm. Evaluate your rental income and operating expenses regularly. Be sure to raise rents when you can as to not fall behind and have profit taken out by rising cost.
4. Conservative Financing:
• Avoid over-leveraging. In a declining market, property values may decrease, and if you are highly leveraged, it can lead to negative equity. Consider conservative financing options and maintain a healthy loan-to-value ratio.
5. Emergency Fund:
• Maintain a financial cushion or emergency fund to cover unexpected expenses or periods of low rental income. This can help you meet mortgage obligations and property maintenance costs during challenging times.
6. Property Improvements:
• Keep your properties well-maintained and consider making strategic improvements that can enhance value. This can make your properties more attractive to tenants and potential buyers, even in a declining market. When possible improve with low maintenance and durable options.
7. Flexible Exit Strategies:
• Have multiple exit strategies in place. If the market conditions worsen, be prepared to adjust your plans. This might involve selling, refinancing, or changing your investment strategy based on the evolving market conditions.
8. Negotiate Favorable Terms:
• When acquiring new properties, negotiate favorable terms. Look for motivated sellers and explore opportunities to purchase properties below market value. This can provide a buffer against potential declines in property values.
• Same with vendors: contractors, property managers, lines of credits, etc.
9. Stay Liquid:
• Maintain liquidity in your investment portfolio. Having cash on hand allows you to take advantage of opportunities that may arise during a market downturn and cover unexpected expenses. Set up HELOCs as a backup to cover temporary cash flow issues or take advantage of opportunities.
10. Monitor and Adapt:
• Continuously monitor the market and be ready to adapt your strategies as conditions change. Stay proactive in adjusting rents, marketing your properties, and exploring new investment opportunities. Stay on top of the ever changing legal landscape.