San Jose, CA · Member since 2017 · 14 posts · 1 vote
I'm a home owner in California and looking to invest in Seattle area for rental properties. Cashflow is relatively straight forward and easier to calculate, so I find myself mostly struggling with the evaluation on property appreciation potential.
I wonder whether some of the same play book items in CA still apply in WA and if not, why not and wo what extent.
For example:
1. Land appreciates and house generally depreciate. Therefore the larger land, the better.
2. School district comes first. It takes many years to build up a good school district and it stays relatively stable.
3. Commute comes next. Good school district appreciates first and most, then the neighborhood with great commute but worse schools (with families sending kids to private schools as an option).
Also, I happen to notice that the ratio on foreclosures seems to be a lot higher in Seattle than in North CA. Does it mean anything to investors?
Real Estate Agent · Alimosho , Lagos · Member since 2016 · 22 posts · 17 votes
9y
Hi Cindy Zhang,
Investing in out of state property for rentals requires much from you as an investor and I must be honest with you it is somewhat demanding. I am glad you understand and can deal with issues relating to cashflow, I will try to expose you some other important factors to consider when buying out of state property for rentals.
It is wise to know the risk of investing in property asset in another state most especially information on the way rent is regulated and controlled in the state. Also find out if the state is a pro tenant, pro property owner or neutral, this should form the basis for your investment decisions particularly on rental properties
You need to do your due diligence properly because a pro tenant state has a tenancy law with rent strongly regulated in favour of the tenants and rents are strictly controlled by laws set far below reasonable returns on investment while a pro property owner state has laws strongly regulated in favour of the property owner but a neutral state has a balanced law system for both property owners and tenants.
On appreciation of property, I am not from your region and I don't think i can be of much help in this area but I know property appreciate every two years and this is regulated and controlled by the housing laws of the state you are in. I am also sure there are books you can get this vital information from out there if you ask from people or investors in the state you would like to invest in.
I believe it is best and reasonable to invest in states that encourage collection of security deposit, whose legal system and the alternative dispute resolution outfit work effectively and efficiently and which is clear about the right and obligations of both property owners and tenants and also whose laws on issues relating to evictions, contract termination, lease and lease renewal, subletting and assigning of apartment favour you as the property owner.
All other issues you may want to consider is the location, a friendly neighborhood and availability of other social amenities to make the place comfortable and habitable to your tenants and their families.
I wish you a successful rental property investing adventures
Real Estate Agent · Alimosho , Lagos · Member since 2016 · 22 posts · 17 votes
9y
Hi Cindy Zhang,
Investing in out of state property for rentals requires much from you as an investor and I must be honest with you it is somewhat demanding. I am glad you understand and can deal with issues relating to cashflow, I will try to expose you some other important factors to consider when buying out of state property for rentals.
It is wise to know the risk of investing in property asset in another state most especially information on the way rent is regulated and controlled in the state. Also find out if the state is a pro tenant, pro property owner or neutral, this should form the basis for your investment decisions particularly on rental properties
You need to do your due diligence properly because a pro tenant state has a tenancy law with rent strongly regulated in favour of the tenants and rents are strictly controlled by laws set far below reasonable returns on investment while a pro property owner state has laws strongly regulated in favour of the property owner but a neutral state has a balanced law system for both property owners and tenants.
On appreciation of property, I am not from your region and I don't think i can be of much help in this area but I know property appreciate every two years and this is regulated and controlled by the housing laws of the state you are in. I am also sure there are books you can get this vital information from out there if you ask from people or investors in the state you would like to invest in.
I believe it is best and reasonable to invest in states that encourage collection of security deposit, whose legal system and the alternative dispute resolution outfit work effectively and efficiently and which is clear about the right and obligations of both property owners and tenants and also whose laws on issues relating to evictions, contract termination, lease and lease renewal, subletting and assigning of apartment favour you as the property owner.
All other issues you may want to consider is the location, a friendly neighborhood and availability of other social amenities to make the place comfortable and habitable to your tenants and their families.
I wish you a successful rental property investing adventures
As someone who resides in New York, I decided at the beginning of my REI career to invest out of state. Now a decade later and these are some key points to keep in mind:
1. You NEED a solid team in the state your investing in (lawyer, realtor, bankers, and especially property management)
2. You need to visit the property periodically and always schedule calls with your property management.
3. You should have a checks and balances process within your business model. Since you are an out of state investor, being on top of everything is important.
I highly recommend shadowing someone who has successfully done this type of investing. It will help you avoid certain mistakes in your process. Best of luck!
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
Cindy Zhang I think the "playbook" is pretty similar and the differences aren't too hard to pick up. The real issue is remote management and local market knowledge. Someone who isn't the Bay Area may think Palo Alto and East Palo Alto are pretty much the same thing. If you live in the Bay Area you know they aren't. I wouldn't have the first clue when it comes to Seattle of the neighborhood dynamics, desirability of suburbs, etc. School quality and commute can give you some insight but it's just tougher to learn when you're not there. It helps to have someone "neutral" that you can trust for their opinion. Agents, lenders, PMs, etc. can all be great sources of information but I always try and vet their advice with someone who has no financial interest in me making a decision to purchase. Yes, maybe that makes me untrusting and paranoid, but I can't help it.
San Jose, CA · Member since 2017 · 14 posts · 1 vote
9y
@Andrew Johnson Great advice - I totally agree, precisely why I'm on the forum. ;o) I'm a bit struggling with two types of different properties for this investment - Duplex with proximity vs. SFH in a more residential neighborhood, with Duplex much higher on lot size and sqft. What's your view on this one?
Investor · Austin, TX · Member since 2013 · 933 posts · 1k+ votes
9y
Hi Cindy,
Looking at your profile it shows an interest in multifamily. If you are considering out of state investing which appears the case if you live in CA and are looking to invest in WA, why not consider a more passive strategy by investing in better cash flow markets where you can seek a total return in both cash flow and appreciation (forced appreciation) by investing with experts that buy value add large apartments? I've attached a blog post that I've authored giving you some background but something to consider. I find most of my investors (many from CA) start out with a few SFRs or small MF and then realize that the returns and work involved in managing out of state opportunities don't really add up to truly passive approach where an expert syndicator knows the best markets/submarkets, can create value through forced appreciation/scale/renovation/better mgt and drive strong investor returns while you keep your nights and weekends free for yourself and family. Something to consider.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@Cindy Zhang Whew, not sure I can add a ton of value there. I'm personally not a fan of duplexes but it's not for a numbers-based reason. My parents had a couple growing up and they were always more of a pain than the SFRs. The nice aspect of an SFR in a stable neighborhood is that it's easy to run comps. There enough "like" properties to know what you're getting. And I usually presume (far from uniform) that the SFR neighborhoods (all things being equal) are better. I wouldn't put too much weight on the size. Put weight on the rental potential.
Maybe my only real point: Size isn't always your friend: more flooring to replace, more walls to paint, more roof to repair, etc.
Investor · Scottsdale, AZ · Member since 2016 · 1k+ posts · 885 votes
9y
@Cindy Zhang You are over thinking things. Stay out of Seattle. We pulled out because of the new landlord/tenant laws. Snohomish is fine. Piece is fine. Even Yakima is fine. ;-)
The key is to buy Subject To, sell to Tenant Buyers, rinse repeat. Can be done anywhere in any market, very profitably. We do such in WA CA AZ TX soon in OR ID and NV. Don't find yourself getting trapped into landlord tenant laws and rent control.
Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
9y
Hello Cindy, native Seattleite here with a duplex in south king county. I replied to your other post on why you may want to look south to Tacoma. But if you do buy in King county I'd be happy to refer you to a great property manager. Good luck!
Investor · Seattle, WA · Member since 2015 · 43 posts · 19 votes
9y
@Cindy Zhang Agree with everyone here. If you are looking for Seattle area, I would highly recommend not Seattle. Cash flow don't make sense here any more and tenant laws are getting more and more restrictive. We have multiple places in South King and Pierce County. It is hard to find things cashflow there as well now. We are actually looking it of state now. If you need help with that or still want investing in my local area, I can help you in assemble a team. Doing it remotely requires good team.
Real Estate Agent · Seattle, WA · Member since 2016 · 65 posts · 29 votes
9y
Rent control has been brought up as possible new law by Seattle politicians, but I don't see it ever being passed. Instead, what they do is to require a new builder to offer lower priced or subsidized homes for low-income. They are working around the system because it would unlikely to ever make it to law. As for other communities, I have never heard of any rent controlled areas in Washington. Anyone else know of any?
Investor · Seattle, WA · Member since 2016 · 143 posts · 68 votes
9y
the biggest challenge in Seattle market is not rent control, it's finding cash flow properties. it wuld be much more difficult to compete with local investors if you are out of state.
Investor · Seattle, WA · Member since 2016 · 143 posts · 68 votes
9y
@Cindy Zhang It depends on how much down payment you want to spend. You may be able to find cash flow property in Tacoma or south king county that is what I heard. you need have a local agent to do some research if you are serious about investing in Seattle. the cash flow you get really depends on the price you paid and when you bought it. I bought mine in 2001 and my cash flow number is great. so there is not an average or above average cash flow per se. in core areas such as Bellevue, Queen Anne, capitol hill you get highest rent but you also pay a lot more for the property so your cash flow is negative unless you pay a lot for down payment.
Real Estate Broker · Seattle, WA · Member since 2014 · 1k+ posts · 427 votes
9y
It's always good to have more land but it's zoning that matters. Most of the time, a 6000 sq ft lot that can fit 1 house is worth a lot less than a 6000 sq ft lot next door that can fit multiple units.
Schools aren't as big of an impact here as they are in CA.
Commute is important.
Best of luck!
A primer on Seattle’s new first-come, first-served renters law
Originally published August 10, 2016 at 8:50 pm Updated August 12, 2016 at 10:05 am
The new law requires landlords to rent their housing units to qualified applicants on a first-come, first-served basis. So how will the policy work, and will it succeed in reducing discrimination?
A prospective renter won’t necessarily know her position in line, but she can ask SOCR to investigate by checking the landlord’s records.
Prospective renters will also have the option to sue a landlord when they think they’ve been skipped — an aspect of the policy that bothers landlord groups.
Thanks for sharing this, @Account Closed. Does it only apply to Seattle city? Any chance that it may expand out to other counties?
Yes, only city of Seattle. The politicians that run the city are pro-tenant and anti-landlord. A number of them believe in socialism. There is a new policy that gives tenant the right to ask landlord how they spend their money.
Real Estate Broker · Mercer Island, WA · Member since 2017 · 49 posts · 5 votes
9y
Honestly, if you look for cash flow, you may look at South King County, like auburn, renton, etc. But the property valuation appreciation chance is not high.
If you look for property appreciation, the Seattle real estate market is already very hot. You may consider Bothell, Mill Creek, etc.
Real Estate Professional · Seattle, WA · Member since 2016 · 12 posts · 5 votes
9y
"The new law requires landlords to rent their housing units to qualified applicants on a first-come, first-served basis."
The keyword here is "qualified"...you can make up some pretty "unique" qualifications to get around this. One we use is must not be more than 5 minutes late to a property tour or early, if so you don't meet the minimum requirements and we can pass on the applicant. We also have a qualification for the application, once we hand/email you the application you have 24 hours to return/email it to us. If you don't return the application within 24 hours then you don't meet the minimum requirement. We have a 3x the rent income qualification as well and when we are renting our townhouse out for $2,500+ per month that weeds out a lot of people. Then there is the background check, credit check, and rental history. No criminal records, no late payments on credit check, great rental history etc. So, it's not AS bad as some may think...