All Forum Posts by: Brian Hughes

I'm based in Seattle and have half my rental door count in city limits.

Thanks for the article link.  That didn't take long,  given that the WA legislature only flipped (just barely) to full democratic control with the election this past november.

Oregon has been having a similar fight,  only they already have a fully democratic state government,  and I believe they were unable to repeal their statewide ban,  though like WA portland and various activitst groups are trying to impose everything it can short of actual rent control.   

I'm hoping that the legislature here (with plenty of representatives that are NOT from super-lefty urban areas)  will be willing to consider that the downsides of allowing rent control would outweigh any benefits long term,  and there are other approaches to ease homelessness and housing availability crunch that should be considered instead (encouraging more housing construction, incentivising and underwriting riskier tenant pools instead of forcing landlords to take them; reinvestment in mental health and drug treatment programs and transitional housing, working with employers to site new job centers in underdeveloped/struggling areas, etc.)

I'm certain that if the state constitution is amended Seattle will implement some kind of rent control.   (In their nomenclature, "rent stabilization")  Every other 'tenants rights'  ordinance the last few years has sailed through city council either as proposed or getting more extreme on the way.  The question would only be how burdensome this one would be.

If imposed it would likely cause a substantial reduction in market activity (buying anyway) if not an immediate increase in properties for sale and commensurate drop in rental property values.   How bad and for how long would depend on exactly what the regulations state.

Anybody in Seattle right now, be getting your rents up to market rate as soon as you can within the law. I'm sure if RC is imposed, it will include some kind of clause to stop owners from responding by raising rents at the last moment before imposition.

I probably overpaid for my first property too.   I bought near the peak of the first housing bubble,  but fast forward 11 years and that property is mostly paid off, its probably worth 50% more than what I paid (after being worth less than what I paid for 6 or 7 years) and everything is renovated, and the rents are nearing double what they were when I bought.

unless you are going to budget for a PM,   having one property in bremerton and the other in everett sounds like an awkward situation involving a lot of boat rides and sitting in traffic.  

I don't pay as close of attention to the kitsap side of the sounds, but I'd probably be looking for the 2nd property over that way.  But agree there isn't a lot of inventory right now and you are lucky to find anything 2-4 units halfway decent for an asking price anywhere near 5% cap.  

Can you jointly qualify for something with your GF's income?    (this could work very well or very badly;   I suppose it depends on the two of you) 

If you can't find a 2-4 unit in bremerton maybe find a fixer house and 'house hack' instead of 'rent hack'.   Get your equity from fixing the place up for a few years and having some roommates,  while being 10 or 15 minutes away from your investment property instead of 2 hours. 

Hi Robert.   I'm based in Seattle and I just recently joined as well.    I've been gradually and conservatively building my rental portfolio in Seattle and more recently, Burien for a bit over ten years now,  I've got 3 properties and 8 rented units.    I'm no expert in anything,  but a couple of thoughts.   Sounds like with your skill set and connections to the construction trade you are well positioned to get something needing a little rehab,  which might help you get something with a bit less competition and build some sweat equity.    

If you are familiar with south king county area it might make sense to consider looking for rentals around there. Puyallup through Tacoma would keep you busy. IMO 2-4 units are the best to start with; SFR's don't come with built-in supervision in the form of multiple tenants and are either 100% full or 100% vacant. Often 2-4 units don't cost much more than SFR's of similar age/size/condition/style/location, can be acquired with residential financing (possibly no need for "creative" financing, and qualifying for which can include a portion of expected rent income), and especially if its your first property of any kind you could live in one unit and fixup/rent the other units to get several benefits going at once. One rule I think would be good for selecting a first property is if you would be willing to live there yourself, even if it isn't the plan. I'm not talking so much about unit size and quality/type of finishes or even the condition (as long as its financible and rentable from nearly day 1; and presuming you will be improving as needed) but about neighborhood quality, and quality of the existing tenants and prospective tenant pool. Buildings can be fixed, but location can't be changed and people issues can be intractable.

In Seattle proper right now with the recent spate of rental regulations,  a hostile city council threatening more,  and very low inventory in investment properties and with what little is on the market often advertised well below 5% cap,  I'm not sure now is a good time to try to get into the Seattle market unless your strategy accounts for all those things;  tough sell for buy and hold.   Maybe not for other strategies, and clearly from the apparent continued demand not everybody agrees with me.

If you're not familiar with Seattle please research the considerable amount of additional regulations and rules that Seattle has imposed on rentals owners of any size (1 fully separate unit and up) within city limits.   They only cut you a break on some regulations if you are actually sharing living space, e.g. roomates.) These regulations limit how much you can charge for up front costs and force you to accept payment plans.   You aren't allowed to consider criminal history except for sex crimes as part of a background check,  and you must accept the first qualified application according to your (legal) rental criteria.   You are required to rent to section 8 and any other subsidy recipients (even if short term) if they otherwise qualify for your rental criteria.  There is no overt rent control (yet) but ordinances that come just shy are being pushed;  things like forcing you to pay 3 months moving costs to each adult resident if you ever raise rent more than 10% in a year and the tenant(s) move.   

All that said,   yes Seattle is currently a very desirable place for people to be moving.  But,  we have had a rapidly appreciating RE market for about 7-8 years now,  and median prices are getting unaffordable for anybody who doesn't have well over a 100k salary.   Everybody says this time is different,  but I'm not sure how much longer til there is some kind of correction.  All it will take is something like Jeff Bezos deciding to move 10% of his employees to the new "equal" headquarters someplace else.

As for finding something in that price range,   you would probably be looking at a resale townhouse or a modest (but possibly very decent) older home in a working class neighborhood in south seattle.   You'll have better luck avoiding competition if you are OK with something on a minor arterial or which needs significant rehab.   Be prepared for a bidding war if it is anything of above average desirability for the price point.  You aren't likely to find a legal multifamily in that price range within city limits right now.

As suggested by prior poster,   going north or south by 30 minutes (off peak traffic) from seattle limits might increase your prospects.    There are closer in municipalities and unincorporated areas (burien, renton, tukwila, white center) bordering south seattle which you might find a duplex in that price range,  but you will likely have considerable competition,  either from other people wanting such a property or from developers.   Still,  inventory is quite low all over.

Good luck.

Thanks Michael.

We need as owners/landlords to be proactive AND constructive with municipalities considering rental regulation rules.   For the most part,  the intentions are noble,  and in some areas like seattle,  issues of affordability are increasing and very real,  even to people with good blue collar jobs.   But as we all know most of the "solutions" that are being pushed are going to only ultimately make housing harder to find and more expensive.

I wrote a fairly extensive letter to my tenants when I brought on the PM explaining my reasons for doing so and what it would mean to them in the long run.   A couple of my tenants ultimately did move out within the last year (PM came in March 2017)  but they were both long term anyway and were buying their own homes and starting/growing families,  so I imagine they would have moved anyway.    I am still heavily involved in building/yard maintenance and turnover work,  but I leave all the stuff with legal risk (advertising, showing, leasing, enforcement, rent collection, deposits, etc)  to the PM.  Overall,  the results are positive so far,  and as a plus side...   I've got the PM in place when I go to buy whatever is next.

I'm glad the results of your contact with your local government was positive.  I wish seattle city council was as receptive.

BH

Thanks to everybody for the welcomes.

@Nghi  We are probably near-neighbors.   I'm based in georgetown right now,  living in one unit of my duplex.   I spend a fair amount of time in Burien/WC as well,  as my other properties are both in that vicinity.  

Burien is one of the few municipalities around that hasn't enacted any further rent regulations on top of state regulations, except for a licensing fee.   I imagine that will eventually change but I'm hoping they don't go off the deep end like Seattle.   I'm fine with tenant-friendly laws,  as long as they are not simultaneously anti-owner.   Sometimes its impossible not to take a side,  but the optimist in me says there should be better ways to do things than what seattle is trying.

It is quite likely I'll look farther south for whatever my next property may be,  but I'm not sure I want something so far away it takes half a day to get there and back.    I like being able to visit my properties at least weekly, even with having a property manager.   I can see the possibility of going as far south as Tacoma,  and there is certainly plenty of housing stock of the type I'm interested in,  and as population and price pressure continues to push people out of Seattle,   Tacoma is going to keep getting better.      

Hi-

I'm Brian and I'm located in Seattle.   I'm not new to RE investing but I'm surely small potatoes compared to some people here,  I have a total of 8 rental units in 3 properties;   a triplex, duplex, and 4-plex.   I live in the 9th unit.   The properties are all located in south Seattle region;  half are in Seattle proper and the other half in nearby suburbs.   I started out in 2000 with a fixer house which I lived in and improved over the course of my ownership,  and then sold it in 2006 to buy the triplex.    I purchased the duplex in 2009 and the 4-plex in 2014.   I managed the rentals myself up until early this year when I hired a property management firm in order to get some free time back, have some backup so I can go on vacations again,  and in response to the hostile political environment towards landlords in seattle.

My long term plan with REI is to get to a large enough door count such that with sufficient equity the net cash flow is enough to live on comfortably (which I would define as matching my current gross software engineer's salary). I think this is achievable either buy continuing to collect 3-4 unit properties, or in a trade-up to a larger property.

I'm pretty skilled at building maintenance and improvements, and between my own experience and the property manager I've got the business of running the rental properties dialed in fairly well.    My main interest in this forum as I slowly transition from cubicle dweller to independent investor is to build up my network and contacts and perhaps eventually find the next opportunity.

Other than RE I'm a computer nerd for my day job, other interests include building electric vehicles, electric vehicle advocacy, bicycling, outdoorsy stuff, and vintage land rovers.  

This looks like a very extensive and well run site.   I hope to learn a lot.  Thanks!