Advice needed: investment strategy in the greater Seattle area

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Advice needed: investment strategy in the greater Seattle area

Becky Y.
Redmond, WA · Member since 2017 · 26 posts · 1 vote

Hi all, I'm a newbie to real estate and have been looking to get a buy-and-hold property around the greater Seattle area since beginning of this year with no luck, and I was hoping to get some advice ...

What I am looking for:

1. A buy-and-hold single family home in an A/A-/B+ neighborhood around the greater Seattle area with good schools that is not too anti-landlord. So far we've been looking at Shoreline, Edmonds, Lynnwood, Bothell, and the east side. 

2. Cap rate >=4% and monthly cash flow >= $200 with a 25% down 30 yr fixed conventional loan. 

3. Little to no update work needed. 

Questions:

1. Are we looking for a unicorn? Is Seattle the right market for this?

2. Is there something wrong with our criteria? What should we change?

3. Regarding criteria #3, I've been thinking a lot about it lately. We have this one because of fear of our own incompetence -- my husband and I both have demanding full time jobs with two very young children, AND we are newbies to RE, so we feel we are not capable of BRRRR. To do BRRRR, I need a partner. Where should I start?

Thanks all!

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Mike R.
Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
9y

i would NEVER EVER invest in Seattle.  The politics is VERY UNFRIENDLY to landlords.  Look at Kitsap county (Bremerton, Port Orchard, Silverdale) as the new high speed ferry out of Bremerton is likely a game changer (commute into seattle from bremerton is 30 MINUTES!!!).  

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  • Account Closed
    Rental Property Investor · Everett, WA · Member since 2013 · 389 posts · 222 votes
    9y

    @Becky Y. welcome! First, if you are looking for landlord friendly city stay out of king county. We live in Seattle and invest in Everett and a big reason for that was to get into a more landlord friendly environment.

    You should have no problem finding a property that matches your criteria in Snohomish County but what purchase price are you looking at? You could easily cashflow $1000/mo with a $1M property but I doubt you want to spend that much.

    I would start by figuring out your long term goals (cashflow vs appreciation, etc) and then looking at lots of properties and figuring out what you like and what you don't like. Good luck! It's like a real life game of Monopoly and I love Monopoly!

    1Reply
  • Thomas Mattausch
    Investor · Seattle, WA · Member since 2015 · 77 posts · 46 votes
    9y

    Becky, if you can get a place that is just a bit run down, that only needs cosmetics, you have potential to pick up more equity than if you are competing directly with Mr/Ms Techie Turnkey! 

    You could likely post here or on construction forums with details of the any rehab quandaries you're facing. If you can find small-time contractors with really good reviews and relatively reasonable prices, you should be in the clear. Assuming your inspector is thorough (hire two!) and you don't have surprises after purchase, the main danger is overimproving and feeling the need to rebuild everything because it's old. 

    Also, I am currently being offered an off market property that needs small cosmetics at likely approx $100k under ARV. I will be seeing the property in person Saturday. I'm a third generation landlord with plenty of construction savvy, and if you would be interested in discussing helping finance or participate in this deal, feel free to drop me a line.

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  • Becky Y.
    OP
    Redmond, WA · Member since 2017 · 26 posts · 1 vote
    9y

    @Account Closed Thanks! I'll PM you :-).

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  • Account Closed
    Rental Property Investor · Everett, WA · Member since 2013 · 389 posts · 222 votes
    9y

    @Becky Y. We have 35 units of our own and then I manage another 40 or so for other investors for a total of 75 units with approx. 110 tenants. I would guess less than 12-15 tenants work at Boeing. The "Boeing Factor" was a major concern of ours prior to investing in Everett and our rationale was that the $1B wing facility was just contracted to build in Everett (2013ish) so we knew Boeing would have a heavy presence in Everett for the next 20 years or so and then within that 20 year timeframe the urban sprawl from Seattle/Bellevue area would reach Everett to supplement the housing market should Boeing ever leave town. Our theory has worked well so far since we have started to get tenants who commute to Seattle everyday to avoid the extravagantly high Seattle rents.

    And no, I don't use a Property Manager, I am one : )

    MLS is a great place to start for new folks. We get 75% of our deals from there still. Other 25% come from the relationships I've developed with multi-family property owners in Everett over the years.

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  • Mike R.
    Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
    9y

    i would NEVER EVER invest in Seattle.  The politics is VERY UNFRIENDLY to landlords.  Look at Kitsap county (Bremerton, Port Orchard, Silverdale) as the new high speed ferry out of Bremerton is likely a game changer (commute into seattle from bremerton is 30 MINUTES!!!).  

    1Reply
  • Becky Y.
    OP
    Redmond, WA · Member since 2017 · 26 posts · 1 vote
    9y

    @Account Closed Wow I totally didn't know -- will look into that! Do you own properties in Kitsap? What's the tenant pool like?

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  • Rachel Luoto
    Lake Oswego, OR · Member since 2015 · 174 posts · 115 votes
    9y

    @Becky Y. If you are interested in learning about the Kitsap market, come to the REAPS meeting in Bremerton...

    http://www.reapsweb.com/

     Best of luck!
    0Reply
  • Becky Y.
    OP
    Redmond, WA · Member since 2017 · 26 posts · 1 vote
    9y

    @Rachel Luoto This is great, thanks!

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  • Mike R.
    Investor · PO, WA · Member since 2015 · 197 posts · 95 votes
    9y

    we do own in port orchard, bremerton, gig harbor.  our bremerton prop has several Navy and department of defense tenants as well as locals.  only had one bad tenant and that was inherited from the prior owner.  good people (do your screening) who are working hard to make a living are the types of folks we have come across.  

    1Reply
  • Becky Y.
    OP
    Redmond, WA · Member since 2017 · 26 posts · 1 vote
    9y

    @Mike R.Thanks Mike for sharing!

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  • Sean Reardon
    Flipper · Seattle, WA · Member since 2017 · 26 posts · 2 votes
    9y
    Thomas Mattausch - I'd be interested in hearing more about your off deal if you're still looking for investors.
    0Reply
  • David Sweeney
    Real Estate Agent · Seattle, WA · Member since 2016 · 65 posts · 29 votes
    9y

    You can find the things you require in a home in the greater Seattle area. I like the communities you mentioned. As others have said, the actual city of Seattle is pro-tenant, anti-landlord. It is expensive too, so look elsewhere. As an investor, start looking to the North of Seattle and you'll find lower prices (Lynnwood, Shoreline, Edmonds/Woodway, Mountlake Terrace, Brier, Everett). East of Seattle prices can be the same as Seattle or higher, depending on neighborhood (Woodinville, Kirkland, Redmond, Bellevue, etc.).

    Here's an excellent article on the best schools in Washington State. Here's an article about the best school districts.

    As for your last requirements, According to Zillow, the average price of a home in King County is $540,000. The average price of a home in Snohomish County is $394,000. Let's work with a nice round number of $500,000. If you put 25% down ($125,000) this leaves you with a 30-year mortgage payment of $1790 @ 4%. However, you need to add in taxes, insurance, and pay maintenance on your property. You also have to factor in water/sewer/garbage unless you have a situation where the tenant pays all utilities. Finally, you should have cash reserves for capital expenditures (CAPEX). So, you have to factor in all your costs and compare against the potential rental income (and don't forget about the vacancy rate!)

    Are there houses out there that can still earn you $200+ per month? Yes, but it can take searching to find them. My last two strategies are to remember that you make your money when you buy the property, so make sure you are getting a good deal. Lastly, in order to verify the deal, I highly recommend the Bigger Pockets Rental Calculator. It is a great tool to use.

    Let me know if I can be of any further help.

    1Reply
  • Becky Y.
    OP
    Redmond, WA · Member since 2017 · 26 posts · 1 vote
    9y

    @David Sweeney Thanks David for the pointers! Really appreciate it!

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