First Time - Multi-Family House Hacking - Seattle Area

[Connor Christensen]

Hi all - I am planning on moving to the Seattle area in the next several months and am thinking about researching multi-family properties to house-hack as my first ever Real Estate purchase. Just curious if anyone has any tips/tricks as I begin this process. Would love some information on loan types, books to read, podcasts to listen to, etc. Pretty new to all this so appreciate the guidance! 

[Michael Haas]

Hey @Connor Christensen - Househacking is how we built our 11 property portfolio, its a great way to get started! My wife Jess & I are on HouseHack #4 here in North Beacon Hill. 

Seattle is great for allowing ADU's and DADU's on nearly all lots larger than 3,200 sq ft, essentially giving all houses the potential to be legally converted into triplexes! As others have mentioned the landlord tenants laws are strict in Seattle, which is why I reccomend ADU's and DADU's in Seattle (as its harder to use that strategy anywhere else) but for true Multifamily properties we recommend looking outside the city (as you can do that strategy anywhere)

Price points tend to be lower on the South Side of Seattle than on the North Side, so depending on your loan pre-approval amount, the number of units you're looking for, and the affordability of each of those neighborhoods you can start narrowing down your search from that.

Just a couple tips for you as you get started Househacking:

1. If you find a property with a second kitchen (ADU or MIL), be aware that 80% or more of those units have been built without permits. Not a deal breaker necessarily, but a risk to be aware of and mitigate.

2. Brush up on building code requirements: in basements you're looking for egress windows that are 5.7 sq feet or more openable (3ft by 3ft casement style windows work best), and ceiling heights 6ft 8 inches or greater (as little as 6 ft 4 inches is ok under ductwork and beams though)

2. Check the unrelated persons count in any city you're interested in. Seattle allows 8 unrelated persons in a rental house, unincorporated Snohomish County allows 6, but some cities allow as few as 3-4. House hacking financials get significantly stronger as you increase the bed count above 4, or add a ADU or separate dwelling unit. *This is more important if you're "renting by the room" with roommates than if you're "Renting by the unit" in a multifamily or a single family with your own private kitchen and entrance.

3. I've had success with cashflow rentals around Seattle by getting off the beaten path- there are established investors bidding up the price (and therefore compressing the cap rate) on many small multi-families, but those same investors are not going after large 5-9 bedrooms SFHs that you can househack by the room or split up with an ADU / MIL. Building DADU's is a great strategy, and there are options to finance them so you don't need to pay the full construction costs out of pocket. Establishing a short term rental / airbnb in part of the home is another great way to maximize rental income.

Cheers and good luck! Message me anytime if you'd like to grab a coffee or hop on a phone call and talk house-hacking, it's definitely changed me and my wife's life for the better!