Owner Occupied Home in Renton

[Damian P.]

Hello Seattle BP, 

I'm considering purchasing an owner occupied home in the Renton, WA area for a first time home purchase. With a lot of growth in general in the Bellevue area - Facebook adding large offices in Bellevue, aAmazon moving HQ2 to Bellevue - I feel the area should appreciate. Will need to use FHA to get into a home sooner than later, as apartment lease is up Q1 of 2020, and I don't want to spend another full year under a lease. I would prefer a SFH over an apartment/condo, for the extra space, as well as for the yard for my dog. My target range is from $350,000 - $420,000. I will put 3-10% down and then sprint to build to 20% equity ASAP.

Does anybody have experience in the Renton area? I'm finding nice homes in the Cascade-Fairwood area; would it be reasonable to believe it would be easy to rent a 3 bedroom this far away from Bellevue/Seattle? I want to stay southeast/east of I5, as areas closer to I5 tend to seem rough. Newcastle/Factoria is nice, but then you are getting out of my price range. What are other good neighborhoods to look for?

Best case scenario, I would be able to get positive cashflow renting it after living in it for at least a year. 

With 3.5% down on $400,000 3 bedroom/1-2 bath ($14,000), that puts me at about a $2,442/month lease, including PMI at 1% total loan, with yearly taxes at $3,000, annual home insurance at $1,000. If I build to 20%, and assuming interest rates stay low 4%, once I hit 20% equity, refinance, I'm looking at around $1,815/month mortgage.

Rent prices on Rentometer range from $1,800 - $2,300 depending on what area you are in. Unfortunately, Cascade-Fairwood seems to be closer to the $1,800 range, I'm assuming because it's farther away from everything. 

If you've made it this far, thank you! Any thoughts, feedback, suggestions? 

[Jeff Dzado]

Hey @Damian P.. I live just south of Fairwood and we looked at a few houses in that area as well. We've been here for around 1 and a half years and I was renting on the East side for more than half a year previously. I was looking in a similar fashion to you for a few years--find a home to live in for a little while, then rent it it out after we found the place we wanted to settle down. I came to the conclusion that is highly unlikely to happen in the Seattle area without getting really creative (such as a live-in-flip, property with an ADU, or some other creative house-hack).

On the specific area you're asking about. I've been watching pretty much every 2+ bed home coming on the market for over a year just south of Fairwood (partially in Renton, partially in Kent), in the Lake Young's elementary school area. A quick browse of a few 3/2 listings this morning showed no houses listed at $400k. Even if you find a place like that, as you noted, rents likely won't even cover the mortgage plus taxes. Then you have to consider things like vacancy and maintenance. This is why I stopped looking for a simple single family rental to live in for a couple of years and then rent out later (similar to your plan it seems). Here's the straw that broke the back of that idea for me: In Eastgate (just east of Factoria), I was finding houses that would rent for ~$2500, but sell for $800k. A mortgage on that property would be over $3k/month...

I'm not saying you can't do it--but I'm nearly 100% positive the "simple and easy route" of finding a single family property on the MLS and renting it out a year or two later won't work out as a cash flowing rental. You're going to have to put quite a bit of work into making something creative work out.