Suggested REI-friendly areas in Washington State?

[Daniel O.]

Hey folks,

I live in Seattle and therefore am not looking to buy any rental real estate locally. For that reason, I've mostly been doing my research in out-of-state areas like Pittsburgh or The Triangle in North Carolina.

Before I go all the way out of state, however, I wanted to see if there were any good investment opportunities in-state. I'm already doing this the hard way, painstakingly combing through city by city, town by town, looking at gross metrics and trying to dig in. That said, I figured that I might get some good feedback from all of you to save me some trouble or at least help me narrow down the field!

Any of you have any luck getting a good return consistently and with any potential for scale inside Washington State? Where in the state should I start looking? I'm looking for reasonable B+ to C neighborhoods, not warzones, not slumlording opportunities. I'm happy starting out with either SFR or MFR, but would appreciate a market where I can grow into MFR. I'm looking for an area that has solid industry that is not at risk of mass-obsolescence in the next decade. Ideally, I also find an area where tenant laws aren't insanely anti-landlord.

Eager to hear what you think. Thanks!

[Andrew S.]

@Daniel O. 

Hi Dan, I don't have any particular resources on Section 8 rentals but there is a lot of information on the KCHA website. And, contrary to most governmental organizations, I find them to be very responsive when I call with questions or just need information in general. There are a few "Gurus" out there who post free videos/articles on working with Section 8. Sure, it has downsides, but there are many up sides too. 

The key is proper tenant screening including thorough checks of the information on their application. Personally, I like working with NGOs who help find housing for those in need because not only do you have the tenant responsible for their portion of the rent, you have both the Housing Authority and the organization to help keep the tenant on track. This is a lot more recourse and much better resources that you'd have if you rent to a qualified tenant from the open market. 

What makes you nervous about King County?  Or is it the City of Seattle that gives you pause?

[Daniel O.]

@Andrew S. good to know. Thanks!

My biggest concern is that sweeping reform (which feels imminent) would take me from cash-flow positive to in-the-hole fairly quickly. I'm not worried about making less money, but I am worried about being on the hook for out-of-pocket costs on large quantities of real estate. A small % negative cash flow across large holdings could add up to a ton of money. 

There are TONS of ways in which this could happen in Seattle, and it feels like King County as a whole is not far behind. For instance, changes to tenant laws, enactment of rent control, continual increase of property taxes, etc. could all throw the math out of whack. And none of them feel far-fetched. (I'm specifically trying to avoid getting into political opinion. Just laying out what I see as the facts.)

[John Barrett]

@Daniel O.

While Seattle is pretty crazy with regards to laws restricting how landlords manage their rentals, I haven't found King County as a whole to be too bad.  I think there are opportunities for good rentals within King County but outside of Seattle city limits.  Additionally, if you are able to become really good at navigating the new tenant laws this could be a competitive advantage for you.

With regards to Section 8, I would just caution you to really look at the values they will pay in whatever zip code your property would be located in.  In my experience I have not found the rates they pay to be above market value.  In most cases they seem to be roughly $50 - 100 under market value.  Also be sure to look at what other requirements there are as sometimes the values need to include W/S/G depending on what agency you are working with.

Best of luck

[Adrian Chu]

Originally posted by @Andrew S.:

If you guys are brave, consider that the King County Housing Authority pays rates in some areas that are well above market. And, before you run off scared, consider linking up with a local organization that helps victims of domestic abuse or veterans find suitable housing. The demand is high, often with good quality candidates, and you are providing a valuable service to our community. 

KCHA simplified the SEC 8 system by assigning rental rates based on zip code. To check rates, just enter the zip at https://www.kcha.org/landlords/rent-utilities/

Feel free to PM me for more information. I am glad to share what little I've learned from my experience in S. King County.  

 Agree!