Out of State Investor looking at South Beacon Hill Area

[Keen C.]

Hi BP,

I'm an out of state investor looking at purchasing a single family house as a rental property in the South Beacon Hill section of Seattle, WA. Does anyone from the area have any opinions/feedback on the area they could share and also what sort of cap rate would be reasonable for such a purchase?

[Alex Chin]

Hello @Keen C..

I live in N. Beacon Hill but have been here all my life hanging out in the area.

SBH is an area that has been slowly heating up, expect an SFH to sell for an averages of $300/sqft. in NBH, to $250-$200/sqft in SBH and Rainier Valley. If you're looking for a rental, I would recommend considering the Rainier Valley as you will have better proximity to the Light Rail station down there, which is one of the drivers for transportation in the region.

As for cap-rates...well, any purchase here is going to based in part on an appreciation bet. You're likely looking at buying around...maybe a 5-cap? I haven't really looked into it in-depth as I am a cash-flow guy, and I can't find a consistent way to do so in Seattle.

In my opinion, unless you have a pressing reason for making a buy-hold purchase in South Beacon Hill, I would look further south. Take a look at the Rainier Valley, Kent, Renton, Auburn. All have very strong rental markets, thanks to the heavy industry and renting workforce that supports it in the valley. Good appreciation potential as well, there are proposals to build the light rail through the area which would greatly enhance the value of any asset there. Rainier Valley in particular, as Columbia City has gotten very hot itself, I believe rising home values are being pushed south gradually.