Seattle area rental deals hard to find now?

Question

I picked up three properties in the past five years that, due to the great prices I got them at, cash flow very well.

Of course now that the market has recovered, the price to rent ratio is not favorable. Not even outside Seattle, like Tacoma, etc.

It's frustrating as I would like to buy a few more properties but this area is a crap shoot for rentals at the recovered prices. Eventually I plan on moving to Florida where I will retire, not only because of the weather, lack of state income taxes, etc. but the excellent price to rent ratio. I can buy a house for 1/3 the price of the houses here and make 3 times as much money there cash flow wise.

Is anyone else giving up on Seattle real estate and looking elsewhere? Trouble is, I'm not sure about turn key rentals as I've seen some experienced investors like freedom mentor (Phil P) try them and get out of them, recommending that you be within driving distance of your rentals.

Troy Fisher · Answer

Shhh!  The eastside of the state is our little secret Brian!  Just because it's like our own little midwest where prices are low and rent ratios are high, and still within driving distance.

Alex Chin · Answer

I am not an experienced investor, but I feel that there is still great opportunity for cash flow investment with the added potential for strong appreciation as a bonus. The easy pickings are gone, but there are plenty of opportunities for adding value through renovations to justify rent increases.

I would actually also look to Snohomish County, I feel that the area has some solid potential and I am looking with strong interest at the area.

Brandon Borchers · Answer

I have briefly looked into Spokane, there are numerous properties at low prices at the moment. I just don't know if the supply is there...any thoughts? They have built up the Valley over the past few years and there where a lot of housing developments and apartment complexes which went in during this building craze. Any thoughts from investors in this market?

GO COUGS!!

Adrian Chu · Answer

Having condos as rentals is worth considering.  Yes, they do have HOAs, but HOAs help you maintain the building and generally pay for water/sewer/garbage which you pass on to your tenants.

I have been investing in condos personally for a few years now and have seen prices skyrocket.  By constantly purchasing units that are at the lower end of market prices (ignore the condos with huge planned special assessments), you can almost manipulate the markets.  The truth is there is a very limited amount of cheap condos out there.

For example, the cheapest 1 bedrooms (South King County), I have seen earlier this year were in the $40k price range.  Now, they are in the $70k price range and selling very quickly.  That's more than 50% appreciation in a mere 6 or 7 months!  But at $70k, they still do cash flow!  Rents for 1 bedroom condos if move-in ready don't usually go below $850 or so.

At this time, there are good 2 bedroom deals under $100k and you can likely get $1000-1200 in rent from those.  Even factoring in HOA and property taxes, you got some pretty good cash flow and lots of potential for appreciation because the condos in the lower end price ranges become great entry level homes for first time home buyers.

Likewise, if you look at duplexes, triplexes and four-plexes, it's gonna be hard to find deals under $100k a door.  They are usually priced at a premium compared to condo units in the neighborhood.

Would love to hear what your thoughts are on this topic as well!

Andrew Kniffin · Answer

I'm finding SFRs in Bremerton now.  But it takes awhile to build your team of qualified repairmen, and the smaller the economic region the fewer your opportunities are to find reliable "team".  Caveat emptor.

I suggest finding one area and focusing on it, so that you can get leverage out of your knowledge and network.

Brian Fouts · Answer

First, never give up.  We change our strategy as it usually comes full circle (natural market cycles).

I would recommend looking at Spokane.  It's sorta like its own little island with regards to economy and market.  Good rental market.

Are you managing them yourself?  I ask because out of our 40 or so rentals, only a small few are in Washington state.  There are definitely other areas in the US that have stronger rental markets.

But if wanting to stick to WA, I would go further south, farther north, look to Bremerton, Spokane, tri-cities.

Adrian Chu · Answer

Will do. 1031 is tax efficient but so far, in this market, you make the money when you buy. If you have the resources to keep on buying, then that is the most ideal case.

Hal Thompson · Answer

@Adrian Chu If you have any off-market SFR deals in the Seattle area, please PM me. I took a look at some of the deals you have done. Definitely interesting flipping non-core condo properties, but don't transaction costs grind you down? Much more tax efficient to wait at least 2 years and 1033 exchange...

Adrian Chu · Answer

You can pull an equity line of credit to have cash to buy other properties or invest in other things.

Jack B. · Answer

I refocused my efforts in Tacoma where I have a rental currently (paid off). While I would have liked to by in King County due to appreciation, the cash flow just isn't there. The places I'm looking at today (3) should be good. One is  in North Tacoma and looks turnkey.

The others are occupied but at the right price and modern enough that they need little work once empty.

Seattle area rental deals hard to find now?

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