Investment Property Before Moving

[Ethan Reiniger]

My wife and I currently live in the great Seattle area, and everyone in our family and community are telling us we should buy real estate soon given the low interest rates and appreciation the Seattle market has seen the past decade. We however plan to move to a different state in about two years but may move back. I am incredibly interested in real estate investing and am wondering if it'd be wise to buy a property here that we can live in for a couple years and then rent once we move. Is it too risky given the high house prices here? Is it foolish to manage a property out of state? Appreciate the consideration, all!

[Evan Polaski]

@Ethan Reiniger, there is a lot to consider here.  From a pure investment standpoint, I would not buy a property if it isn't going to at least break even on cash flow when rented.  Appreciation is a very real part of real estate returns, but there is also no guarantee the Seattle market will continue appreciating.  What has happened for the last decade is not the same as what has happened in the last year.  

That being said, I don't see the Costco's, Amazons, Microsofts of Seattle leaving there anytime soon, and so I do think there will always been high demand for property in Seattle, but the double digit annualized appreciation that has been occurring over the last decade, I don't see continuing.  Add to that the various "HQ2s" that are coming which implies the major, high paying employers in the area will not be hiring as heavily as they have in the Seattle market, and you create a possibility of lower demand plus higher interest, likely creating stagnant prices in the near future.

Therefore, back to my first comment: if it will cash flow on a monthly basis when accounting for management, leasing commissions, repairs and maintenance, Capex, taxes, insurance, loan payments and vacancy, then it won't matter if you see appreciation in the shorter term. But if you are cash flow negative, and relying on appreciation to carry you through to make money, you are rolling the dice.