What strategy is working for you in Washington State?

Question

Hey all,

I run affordable housing for homeless Veterans and their families in King County - I love what I do and love developing and running apartment complexes for the organization I work for, but now I want to develop my own portfolio as well.

I've been running deals through the calculators for practice but want to get an idea from all of you what you find is working in our area.

I understand that every market is great for different strategies, so what has been working for you and where?

Curtis Bidwell · Answer

@Evan Mack Market conditions don’t really change my strategy.  There are still deals if you know what your looking for.

I’m currently working on a mid-size complex that was on mls for several months.  It was under contract at least 2 other times, failing primarily due to its inability to debt service based on current rents -which are significantly under market.

I like these kind of deals.  They don’t make sense on the surface (leading to less competition), but if you know your market and can arrange favorable financing you can do REALLY well.

Once stabilized rents will increase $385/unit and the value will almost double!

On this deal I will do 25% down, interest only for the first year of a 5 year adjustable note giving me time to get rents closer to market (which I estimate at 12-18 months).  Actual debt service is only .98 but with interest only it jumps to 1.38!

Bottom line: the deals aren’t typically announced as such.  Know your market, know your lender, review lots of listings, be ready when you see the difference between what is and what should be.

James Gliwa · Answer

@Matthew Cullen Yea it does. Nothing crazy at the moment but I'm planning to gradually bring the rents up to a market value over a few months to increase the cash flow

Sharon Rosendahl · Answer

Be willing to go a little further out. I got a great deal out in Oly Pen. I made repairs and brought rent up to market. Unit one went quickly. Unit 2 became vacant last month and we are doing a minor remodel to make it more appealing. With market rents these units will do well. Unit 1 carries both units.

Bought a couple in central WA. Not as happy with them but they are doing ok. I have a much harder time finding tenants despite the area not having many rentals available and yet in an area that there are jobs. Unit 1 is rented but 2 I just took off the market to give it a rest and figure out what I want to do with it. Unit 1 carries both unit there.

I live a little north of Seattle and self-manage.

Matthew Cullen · Answer

@James Gliwa - Hi James - Does you turn key triplex cash flow? Impressive if it does. I have one triplex in tacoma and have been looking for more

James Gliwa · Answer

I live in Seattle but recently purchased a turn-key triplex down in Tacoma. Seemed to be a few more options down there for the multi-family route. You're probably not gonna find any 10+% CoC returns, but there's still opportunity in the 5-8% range. This turned out to be perfect for me as I already have a day job that I love and pays well.That being said, I had to shell out 25% down for the triplex which took ~3 years to save. But, I only found biggerpockets last year so it didn't feel too long. ;)

Next step for me would probably be to buy a 3-4 bedroom somewhere in South Seattle  and rent the other bedrooms.

Evan Mack · Answer

Hey Robert,

I've been wondering about fix and flip - it isn't my main objective (buy and hold, especially multifamily) but I'm looking at it more and more as I run numbers on small multifamilies and find they won't work.

I've got a great realtor (luckily, my girlfriend), contractor, and have connected with some hard money lenders through friends that flipped houses before 2008, so it feels like I'm set up to try it out. '

Any suggestions on where to look and what to look for? I'm assuming value adds like another bedroom would be wise.

Also, I'm curious if your strategy has changed with the cooling of the Seattle market. The only thing that would hold me back right now is that it would be my first flip which means it could take longer than expected while the market cools and my ARV no longer works.

Robert Freeborn · Answer

Hi Evan,

I think our area is hard to get started in.  Unless you have the independent funds to get started with multi family, I think fix and flip is a great way to go.  Its what I'm doing to build up my capital, then i'm going to start into rentals and multi family.

There are plenty of deals on the MLS.  Thing is, you have to negotiate to make some of them work.

What strategy is working for you in Washington State?

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