All Forum Posts by: Brian Hughes

given that you are going to school in Bothell,   seems like everett/duvall and other areas of snohomish county might be your best bets,  but as you have probably noticed,  inventory is low and prices are not.   Without knowing anything else about your budget, skills, interests, or plans,  hard to give better advice.

I actually like to scout by bicycle. In addition to getting lots of fresh air and exercise, You can much more easily dive down alleys and dead ends and quickly pull a U turn to go look at that algae-covered FSBO sign in the bushes. It helps you to get a much more close up look at the neighborhood (how nice or run down are the houses, cars, how much trash is in backyards, how many homes look like they are being actively worked on, etc) vs. driving around by car though obviously you need to identify a narrower geographic region (a city or town) first.

I agree with the suggestions to look at small multifamily (2-4 units)  and make it something as close to you as possible.    Also,  try to make it something you would be willing to live in  yourself,  at least insofar as quality of the neighborhood and potential tenant pool.   If the building itself or units aren't in a condition you would consider liveable (even if they are legally rentable),  be sure to have a plan for getting them there.    It'll probably mean you ultimately have a better property than a lot of your competition,  and potential tenants absolutely notice and appreciate this.   I've had more than one vacancy where the application commented to me on how much better my unit was than others they looked at in the immediate neighborhood.   All I do is try to give a damn.  

Outside of Seattle,  WA state and most municipal landlord tenant laws are reasonably sane,  but be aware of the trends in those laws towards pushing more risk and responsibility onto property owners.   Be sure you are well versed in the laws wherever you choose to invest,  and stay up to date with changes.

One option depending on your circumstances and future plans (financial and personal) for getting the down payment is sell your current home and move into a 3 or 4 plex,  still leaving you with 2 or 3 units to rent.    

Another out-of-the-box down payment option: there is at least one local tech startup that is offering down payment assistance in exchange for sharing proceeds from AirBnB income from the property for a period of time. They are mainly focused on SFR's but they may have small multifamily programs too. Maybe worth considering. I believe its Loftium.com, there may be others. (I'm not affiliated in any way)

If you have at least $100K in your 401k balance,   you can loan yourself up to $50K and all the interest payments go back into the account.   This could be a good option for adding onto a down payment,  but it carries some risks if your job situation changes so be sure to know all the risks of using this method of obtaining down payment capital.

Based on my (limited sample set) of observations buying a single unit (house)  far away is probably the biggest risk (all else equal) since you can't easily keep a close eye on things and there aren't other residents/tenants to provide a check and balance if you get a problem tenant.    

I agree with both sides of the argument WRT PM's  - I self mananged for the first 10 years or so;  growing from 2 units to 8 during that time frame.    Overall it went well,   but I live within a 15 minute drive of all my units.   I did get a couple of moderately bad tenants (not malicious,  but definitely irresponsible)  but I managed to avoid getting any of the professional-bad-tenant types (a few certainly tried).    To some degree that was me sticking to my guns insofar as screening,  background checks,  and requiring up front payment for all move in costs.   Partly also there was probably some luck involved.    I do believe it was very valuable,  as prior posters have suggested,  to get an understanding of what daily management takes and what screening and dealing with people is like.   For an introvert-shy-engineer type like myself it was an education and required learning to be more comfortable operating well out of my shell.

There are real risks of self managing,  and these are getting more pronounced, especially in some "blue" areas where the definition of discrimination and what constitutes 'fair housing practices' is evolving and getting more complex, subtle, and subjective.   I've never had any intent to discriminate,  and I've always tried to follow the law, but I'm in Seattle where it is now possible for me to unconsiously discriminate, so a bunch of laws exist to helpfully prevent me from doing that,  requiring considerable extra kabuki and adding additional risk and punishments in various scenarios.   In my case, this is one of the reasons why I decided about a year ago to go ahead and hire a PM.    This doesn't fully insulate me from liability if the PM does something they shouldn't,  but its now the PM's job to be up to date on all of that and provides a buffer and more parties with insurance.   (I also carry a decent amount of umbrella coverage personally).   Other reasons for hiring the PM were to get some free time back  (I can go on vacations again!)  and to position myself for growing to a scale where I can't manage the units and keep a full time job (or full time hobby) at the same time.    Since I've held the properties for a while I'm able to absorb the PM fees and so far I consider it worth it.

If you are going to self manage that house,  make sure to give your contact information to neighbors and make it clear they can call you any time they are concerned about what is happening on the property.    The idea to hire a real estate agent or somebody to keep an eye and take pictures is good.   DO NOT SCRIMP on screening and regular inspections.   Set up your screening criteria to look for the best qualified tenant you are likely to be able to find, even if it takes a little longer to find somebody.    Try to run the place as if you were a PM, and follow best practices thereof.   Keep in mind 1 bad tenant can easily be more work 10 good ones.    With a single unit,  you don't want the bad one.   

Good luck.

If its some kind of first time buyer's loan program that requires you to live in for 5 years (or whatever) that may not stop you - look for a home with MIL/ADU or DADU (or both) or potential thereof. You will get the benefit of the loan program and still have the opportunity to offset a significant chunk of your mortgage with rent income. Since you have construction experience getting a liveable fixer might help you look at properties that the hordes of amazonians who don't have time to fix something up are avoiding.

You can also look at buying a home that is in an area that is likely to be upzoned in the future,  which may allow you to eventually make it offical and convert the place to a legal multifamily.

All the while the savings/income you get from hacking this first property can be put towards a down payment on property #2,  or just used to aggressively pay off the debt.

Make yourself totally familiar with current and proposed rental ordinances in Seattle!!!  

Good luck

Hi Leigh-

I'm based in Seattle  (currently living in georgetown)   and have 8 rental units in seattle and burien areas  (been doing this for about 11 years now so I got in before the most recent few years of crazy and probably unsustainable appreciation).    I'm currently stewing on the options for my next investment.   

Sound like you have the similar end goal to me- get to a point where the rat race is optional.    In any case I'm sure there are many great opportunities in the midwest and other parts of the country,  but there is a lot of additional risk too in terms of having to successfully assemble a and remotely manage a trustworthy team of people who will do ALL the hands on work for you.    I know its doable,   but in that scenario is probably as important as the property selection itself. 

The few investment properties I've seen advertised through this forum that were in this region I know from my familiarity with their areas were not good buy-and-hold properties.   I don't know whether its true of other areas but I'd be somewhat more guarded about considering why a property needs to be advertised out of state; what do the local buyers know about it such that it won't sell to one of them?   Again,  maybe there's nothing wrong with it and there just aren't enough buyers.   But something to consider.

What about closer areas,   like the I-5 cooridor Tacoma south to Vancouver WA?   There are multiple communities along there with lots of less expensive multifamily and its within a day's round trip,  which will allow you the ability to keep a much closer eye on your first investment.

Good luck!    

Assuming you mean Seattle city limits.  I suppose it depends on scale.   But everything I have alerts set up for (multifamily properties up to maybe 10-20 units in working class areas)  are being marketed at cap rates between 3 and 4% usually and are selling in about 5 seconds.    If its big enough to require a commercial loan your interest payment alone would eat the entire gross income;  never mind taxes, insurance, maintenance, vacancy, management fees, regulatory fees, etc.    In other words,   25% down would not cut it for commercial as they want you to show you can make a profit.   If it is a 1-4 unit you would have negative cash flow and would need to be banking on appreciation or ability to increase rents.  Maybe or maybe not a good idea.   If you go a bit farther out   (Tacoma to Everett)   there are occasionally some 6% cap rate offerings but you are probably going to have a lot of competition for the good ones.

I've said this on a few other posts too but will repeat it here -  if you are thinking about buying an investment rental property in seattle,  be well aware of the current and likely upcoming rental regulation ordinances that have been imposed by City of Seattle.   There are several ordinances that can significantly affect the risk calculation depending on the type of property you are looking at investing in.    Personally,   I won't buy anything else in Seattle until I know where this merry go round ends.    (There was a small multifamily property recently that came up for sale 1 block from another I own,   at one point I wanted to buy that one,   but not now...) 

As long as there are no major economic shocks or major geologic or geopolitical events Seattle will probably keep growing.   Barring a real catastrophe any interruption will be temporary and a good time to buy if you are positioned for it.   Seattle and puget sound are very well positioned and on our way to becoming a global player as a region.   But I suspect that price appreciation is going to have to slow down.  Its just getting too unaffordable for too many people too fast at least in close-in areas.    That said there are a lot of cities with higher real estate prices,  but they also tend to have denser overall housing, meaning you don't need to buy into as big of a patch of dirt.    It will take decades for seattle to start looking like new york or hong kong,  but it will eventually happen.

Look for a good location property (commuting, schools, neighbors, etc) in need of some elbow grease.   How much depends on your skills, etc.  But that gives you room to improve the value via your own efforts,  and not just rely on the market continuing to appreciate.   Maybe find something with subdivideable land in an area that is going to see urbanization/densification,  hold it for a while and wait for the infill development to start;  sell the extra land while keeping the home.

Just my opinions.

Pittsburg will have a local landlord's/apartment managers association.   Join that.  Hopefully they will offer rental forms either as a subscription service or priced by the each.   Use those.   If no such service is available,  find a local attorney who does that kind of work and buy the forms from them.    You should make sure whatever forms you have are designed for your area and compliant with your area's laws,  else they could cause you a lot of trouble down the road.    Unless those online services have rental agreements that are specifically vetted for your area I would not use them for that purpose.

The tenants that were occupying the 4-plex I bought in 2014 were on rental agreements that had been pulled out of a cracker jack box.     They managed to specify the rent amount, deposit, and MtM terms but that was about it.  Among many other problems there was no condition inspection.   In WA I don't think you can take or hold a deposit without it.   In any case gave everybody 30 days notice that I was amending the agreement and asking everybody to sign new month-to-month agreements including condition inspections using the local rental association's forms.   I made it clear I wasn't raising rent (at that time) or re-screening anybody, and any pre-existing condition or damage problems as of the point they signed the new agreement would not be held against them.

Out of 3 occupants (4th unit was vacant at that point) 2 were happy to sign because they knew how terrible the current agreements were.   The 3rd who was a personal friend of the prior owners grumbled about it a bit but eventually came around when he saw me starting to fix all the stuff the prior owners ignored.

the area with the otani gardens development is in skyway,  which is an unincorporated area between renton and seattle proper:   

https://en.wikipedia.org/wiki/Bryn_Mawr-Skyway,_Wa...   

Its definitely up and coming.   The "undesirable for incorporation" comment in the wikipedia article is likely to change in the next decade or so IMO.   Its in a good commute location for seattle and bellevue as well as renton, burien, tukwila and many other areas with good employment.  As the article says,  mostly modest SFRs from the 40-60's but there is plenty of newer housing stock too.  There are multifamily properties of varying scale as well but not in as high of concentration as closer-in neighborhoods.  Quite a few homes in this area have a decent amount of land with them and infill development is definitely a thing in that area.  The area is on a pretty good sized hill, making up the southern end of the ridgeline that runs between lake washington and I-5 up through seattle.

There have been a few properties in that area I would have seriously considered if the timing were right.