Best place for buy and hold - Washington or elsewhere?

Question

Hi everyone,

We live in Everett, WA and are looking to start investing.  It's almost impossible to find anything within 2 hours any direction that meets the 2% rule.  Fixer uppers are all well over $100K, which we can do but I'm not sure if it's the smart play.

We are looking long-term and are most interested in appreciation over the next 10 or so years but obviously want the property to have a positive cash flow as well.

We are open to out of state purchases but want to make sure we choose the right place as from what I understand you have to build a reliable team and it's harder to do that out of state.

I would love to hear opinions on this as I really appreciate that there is a lot of knowledge on this forum.   Thanks!

David Clinton III · Answer

in my 3rd year as a full-time investor, I've never seen a single property meet the 2% rule in Spokane or Coeur d'Alene.  I have only seen the 1% rule met maybe 5 times in CDA (a bit more in Spokane).

Those may be out there, and if you're willing to invest from afar, I recommend checking into cities that make that easier. But for locally here, I think those deals are a lot more like unicorns!

Bret Emry · Answer

Do you know anyone who flips or wholesales? Just a suggestion, you might start by calling the "we buy houses" numbers on posters around town and see if there is a potential relationship there. Those may be buy and hold investors, flippers, or wholesalers. Even flippers may assign contracts (like wholesalers) depending on your relationship and their deal flow. I am not up to speed on the regulations there, but you might consider putting out some signs of your own. Spokane is a great place to invest, although there are some neighborhoods you'll want to avoid. 2% is hard to find if you're just browsing the MLS. I've seen a couple but they were multiple SFH buildings on one site that needed significant work OR larger converted multifamily in less than desirable areas.

Jay Hinrichs · Answer

@Mary Wilson  for passive buy and hold out of state the 2% rule basically does not exist except in very rare instances.. its more like the 1 to 1.5% rule  and sometimes only the .08 rule.

those rules were coined on BP in the depth of the great financial crisis..

Although folks that live in low value to higher rent markets can achieve this with ease and or do better.. they do that by sourcing them selves rehabbing themselves and generally managing themselves.

Andrew Leese · Answer

Mary, did you watch the recent BiggerPockets Podcast with Ryland Taniguchi? He's a Seattle-area veteran real estate investor. You might try to hook up with him some time. But check out the podcast first. It's well worth the time!

Hint: Tacoma-Olympia may have potential.

Best of luck!

Roger Vi · Answer

Hi @Mary Wilson! Thanks for the FL info, here is my input on Everett and Sno/King County in general...

Prices have gone up significantly last few years and we are back to all-time highs in many areas. Add that to the fact that this isn't historically a cash-flow friendly area and it makes the deals even harder to find!

If you are planning to self-manage your rentals, do most repairs, and hold long term (15+ years), I would say shop around and take advantage of these low rates before they are gone! I consider anywhere in Snohomish/King County along the I-5 corridor to be prime for appreciation and long term growth. The combination of good jobs in a diversity of industries, favorable climate, and liberal policies have been attracting people from all over and there is no sign of this trend stopping. Our local geography also plays a part, the mountains and water limit the build-able land and prevent urban sprawl. They say we are the next San Francisco and I believe it!

Cash flow is calculated based on the assumption that you pay a normal rate for licensed contractors/repairs. If you self-manage and do repairs on your own, you are saving money but trading your time to do it (paying yourself normal rate to do repairs). Since we cannot accurately predict appreciation and this area does not see much cash flow, you are essentially betting your time on appreciation.

If you buy in this area, it is a pure appreciation play for the most part. You could venture 30+ minutes off I-5 to find better cash-flow markets. You could even go to Eastern WA to find better rent/price ratios. However, if you are not self-managing and will need to build a team, I would argue that the process and difficulty is not any different in state or out of state.

You already have experience with the FL rental. That is about as far as you can get from here in the US. I would open up my search to the entire US. Not saying the this area isn't a good place to invest. I just wouldn't assume it is your best choice just because you live here.

Hope this helps!

Mary Wilson · Answer

Hi Ali, we're looking at multifamily and SFRs for now as we want to get our feet wet and get some experience before going any bigger.  We're willing to put work into the property for sure.

Ali Boone · Answer

Hey Mary! Same situation for me...I live in LA and there's no cash flow around here. I've always bought out-of-state and I love it. Teams are definitely most important.

Any idea on your budget or any preferences or interests in property types and such? Do you want to put work into properties or stay more hands-off if possible?

Mary Wilson · Answer

Awesome, I'll look into wholesalers.  Thanks!

Best place for buy and hold - Washington or elsewhere?

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