Is 6% cap rate normal now for MFH? MFH+FHA = Where?

Question

Hey everyone,

So, I need your opinion/life guidance on two MLS "deals."

Ones an expensive triplex in Seattle Area, where I currently work at, and *kind* of want to invest. I'm not a fan of the PNW being from the east coast but my current job is in Seattle and is semi-remote friendly. I'm on my 2nd year in the area and sick of renting/dealing with land lords in King County. The job market in Seattle is strong, and it's exhausting to find a good place to live - both options are affordable and I don't have any liabilities.

Triplex - Northgate area, been listed for a few months, let's say 775k. Two 2 Bedroom and one Bedroom (where I'd live). cap rate of 6% is met with all three being rented at market rate, but drops when I self-occupy (which is okay.) I'm looking at $1750, $3500 gross for renting out both two bedrooms minimum and living in the one bedroom unit- (where it's about $1500/month for a 1BR). With the addition and final building of the link/train connector in northgate, property value may be solid, but I just think 775K is high to play landlord - but affordable alternative compared to $1500/month for a studio/1BR rental)

Then, in Tampa, Florida area, duplex. Two, One Bedroom units Maximum rent is about $950-1150- it's right by a university and main artery connecting downtown to another business district and a hop from the local highway. They're about 275k'ish (A local comp I missed last year a 2x 2br duplex for 305k)

I operated an airbnb in Tampa for 3 years and it's an easy $80/night for entire place or $950 minimum for standard lease. I continue to operate airbnb's elsewhere in the world for income/place to crash but it's a bit different looking at a mortgage vs a standard lease liability. Airbnb in Seattle is changing and the norm seems to incorporate an LLC, get a license to operate, register the unit w/ the county and manage the airbnb from that instead where in FL it's pretty much list it and you're good to go. Cap rate is the same, 6%'ish.

One side of the deal is buy where I "work", and yes, I can walk away when I'm done w/ the area, but I'm not sure how much longer I'll be in the area and another year to throw $18,000 is eh. Plus the PNW is a tech hub, the next San Francisco in many ways for tech companies so having a triplex is a nice hedge for the future as housing will be tight.

Florida is Florida, I like the state, I grew up there and I know the area well and have no shortage of resources to help w/ DIY, renting, airbnb, etc. Tampa is transforming, but no where near the density or tech hub that Seattle is - case in point, my job pays 3x in Seattle then it would in Tampa.

Other data points: 28, 150k/yr salary, 770 credit, no debt.

Jake Alger · Answer

Hi @Esteban Irurueta,

Your analysis of Seattle is pretty spot on in my opinion. I come from a technology background and have been saying for years that Seattle is the next Silicon Valley. With more and more tech coming here (and expanding here), along with the public transit that's being built, it's a great opportunity for buy-and-hold investments over the next 5-10+ years.

~6% cap rates are pretty standard in our area for MFH. You can find higher cap rates in certain areas but may need to bring a tool belt and some cash to the deal. In other areas of our state, 8-10%+ cap rates are achievable (think Wenatchee & Spokane). Those are high rental markets with cheap housing.

Being that you're in the Puget Sound area, a house hack of a MFH is a very good and viable option. I've been seeing and working with more clients the past few years who have been house hacking their way through our higher priced market. Heck, I did so with my last house as well. The only thing I would caution and tell you to look into, is becoming a landlord within Seattle city limits. The ever changing, pro-tenant leaning laws have been a headache for some investors but not for others. Always good to have all the info though :)

Is 6% cap rate normal now for MFH? MFH+FHA = Where?

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