Help analyze this potential buy... MF in WA State

[Luke Colton]

Hi All,

Long time lurker on BP and have gained alot from this site! Looking for anyone who wants to chime in and let me know what they think of this potential buy. Looking to make my first real estate purchase.

- Multifamily property in WA State, located just outside the Seattle area

- 2 houses located on the property, 4br/1ba and 2br/1ba 

- Both have new roofs and siding in recent years

- Both currently rented, $1650/month and $1200/month respectively

If I could get this property for around $400k, what do you guys think about that deal? This market has been red hot and really tough these past few years and it's been tough to get a foot in the door. I found this deal off market.

I would more than likely live in one of the units (most likely smaller one) at first for a little while, but then eventually plan on keeping the property for a long term rental. I'd most likely go for an FHA loan.

It seems like the rents are pretty close to market, maybe a touch below, and could be potentially raised a little bit. 

For you Northwest investors, do you think as a long term buy and hold this could be potentially a good deal at that price? Thanks for any insight, really appreciate it!

[Scott Shay]

On the surface this sounds like a pretty good cash flow generator, with a good cap rate. That being said there are a couple things to point out. 

1) It really depends on the specific location outside Seattle. If in Bellevue you have found a steal. If in Humptulips (and yes that is a name of a rather nice little town in Western Washington), you are paying too much for the properties. Though probably not there because your rents are way higher than they should be for around there.

2) I would be very hesitant about 2 houses on one parcel. They happen around here but not often so when I hear about one I look into zoning and see if it zoned multifamily. If not you could have problems in the future.

3) As for the housing market it is definitely slowing, in and around King County. That being said rentals in and around the city are few and far between so rents appear to be staying steady. The more away from King county and the other major cities on the sound the more rental inventory there is. So again that brings us back to what "Outside Seattle" means.

This could be a great deal but until you get into the details you will have a hard time getting sage advice. Unfortunately for you I have not been called sage before. Good luck if you go for it.