All Forum Posts by: Chris Newman

Hi @Tim S.

Welcome to Bigger Pockets!

I don't do the normal SFR REI thing. I'm in the "commercial conservation" niche in Snohomish county, buying dirt cheap rural/farm acreage and making a profit by NOT developing it. The profits come from "clipping off" and selling the unused Transferable Development Rights under the new county resource land conservation program. These credits are sold to urban developers, who will use them to boost development density in the western urban growth area of the county by 160% above base permitting (from 22 to 58 units/acre @ 7 stories) and, soon, in the South Lake Union explosion in Seattle. (20 new skyscrapers planned beyond the current tech boom.)

In certain cases, these rights are worth a lot more than the asking price for the land, so it's an arbitrage deal. You get to keep the land, now fully paid off, and can still do everything on it that's normally permitted, except build houses. Plenty of profitable land use options, still. Typically, the value of the land after clipping off the TDR credits doesn't go down and, in some circumstances, actually goes up, sometimes considerably. I don't even have to physically visit the land. 

My general plan with the residual land is to sell it off on low-down seller notes and enjoy the no-management "mailbox money" for many years to come. Unlike most investors, I'm drowning in deals, far more than I can swing right now.

So, I review almost everything in Snohomish county, just north of Seattle, that comes across Redfin and have been doing so for a couple of years. 

My vote for top Pacific Northwest residential property rising star in the mid-term is nearby Granite Falls, on the north edge of Lake Stevens. This is actually a beautiful area with lots of natural resources and trees. About 15 minutes from the Boeing airplane complex and 40 minutes to downtown Seattle/Bellevue. GF is an incorporated city dating back maybe a century, with more sub-$200k residential (sometimes now zoned multi-family/commercial) properties concentrated near the urban core than I've seen anywhere else, without actually being urban ghetto. Generally, prices here for comparable properties are less than half of Seattle's.

In the recent past, there's been a lot of political corruption that kept property values down, as well as the kind of riffraff that cheap housing attracts. But, I'm also seeing a lot of new multi-family developments, as well as a regular stream of cheap distressed SFR's that show back up on the MLS restored and selling fast at higher prices. So, investors are finding good deals here and the gentrification is well underway, rental prices are going up and the marginal tenants are being forced out economically, into Monroe, Startup and Goldbar to the southeast.

If I didn't have a better fast-profit gig going than the typical SFR buy-and-flip/hold, Granite Falls is where I'd be concentrating.

If I can help, please PM me.

@Chris Parker I'm not an agent - I'm a private investor. But, I scout development land hard in this South Everett area. I just locked down a business park-zoned site a few miles away, near Paine Field.

The Snohomish county Transfer of Development Rights program might do you some good near Everett Mall Way. These TDR credits are my REI stock in trade and my main current focus is acquisition, just starting to venture into the liquidation end that will result in receiving fat payments.

For the foreseeable future, the only place where you can "cash in" TDR credits is in the SW Urban Growth Area, which is the area of unincorporated county west of I-5, between the cities of Everett and Lynnwood. Everett Mall Way is inside this UGA.

But, to take advantage of TDR the land has to be zoned either MR (High Density Multiple Housing) or one of several business zonings. If it is, that opens the door to the near-term building of mixed use developments with ground floor retail in 75' buildings and an eye-popping permitted residential density of 58 units per acre. 

The first 22 units/acre come the upcoming base permitting and you can boost this by another 36 units/acre by transferring in these new TDR credits, at the rate of one Receiving credit per extra unit. As a developer, this is essentially a streamlining of rezoning for higher density, which may or may not be approved. By using TDR credits, the rezoning is both immediate and guaranteed. 

(PS I'm still open to JV partners with this TDR investing. There are far more opportunities than I have the funding for, or desire to chase. I'm drowning in deals.)

The market value of development land in this area ranges from about $20,000 to $40,000 per unit for the land cost part of the development. The prices will vary depending upon the location. 42% of 22 units is about 9 units that would be base-permitted on .42 acres. I'll let you do the math.

But, none of this does you any good if your land isn't zoned for commercial or MR. What's the zoning?

If it starts out with an "R," such as R-9600, you've got residential neighborhood land. This just might qualify for two lots. If there are no major flaws to the location, a ready-to-build residential lot in the Everett Mall area is probably worth just over $100,000. Certainly, there are lots of small builders who are looking for close-in lots. But, there are also some pretty "gritty" neighborhoods in the area, which hasn't seen a big gentrification push, yet. So, a lot of the market value is going to depend upon immediate locale.

If it's residential zoning and will accommodate two SFR lots, I'd put it on CraigsList at $250k and see if anyone nibbles.

If you want to do deeper market research, sign up for a free account with Redfin.com. It's easy to search for comparables in this neighborhood and they'll even send you emails when something new comes on the market. This is how I do my shopping for rural TDR source land acquisitions. 

Another thing to consider is coming new change in Snohomish county land that will directly impact SFR zoning and that's nearing the end of the regulatory pipeline: This new regulation will lower the required land square footage to build duplexes in residential neighborhoods down to the same as for a single family home, instead of 150%. Land that will permit out for a duplex is worth more than SFR land, so you might be sitting on a future site for a pair of duplexes.

This change isn't a done deal, yet. It's been through the Planning phase and the county council has been briefed on it. But, the last time I checked about a month ago, the council had not yet scheduled public input and a hearing. Since I'm not planning to build duplexes in the near future, I haven't followed this closely. 

My educated guess is that this duplex upzoning will complete in the Council before the end of 2016. For exact timing, you'd have to ask the lobbyist for the SnoKing Master Builders Association whether he approves or not, since the MBA calls most of the land use shots around here. If you want to buy elected officials in a larger market cheaply, Snohomish county is the place to spend your money. 

You can find the latest duplex zoning info on the county website, probably in the Planning section under "Projects" or something similar. There's a section that lists all the Planning projects (including one to allow farm breweries on ag-zoned land), with links to the latest progress info. Each of these will have a designated program manager and if you email them, they'll (probably) put you on a mailing list to be notified about future hearings etc.

Hope that this helps. Please keep us posted on what you learn.

Welcome @Bryanna Mendoza ! You're definitely on the right track. The traditional wisdom in any business startup is to keep your day job and only quit that when it's bringing in less money than you can make with your "sideline." 

One bit of advice is to keep your mind open to learning about other entry-level real estate investing than the standard single family residence fix-and-flip value-adding strategy that all the late night infomercials tout. 

At best, this is a lot of very hard work. But, the biggest challenge is finding the deals. Small real estate investing in the Puget Sound region is red hot, with hundreds of local players and there are scores of established investors who can simply write a check for the full purchase price, if they like the deal. Seattle is saturated with these folks and I don't even look there.

Successful wholesaling isn't usually a good newbie option, despite the fact that it doesn't require any cash to begin. You do need to know the market, and the game, very well. And, you need to have a network of investors already lined up who are ready to write checks and pay finder's fees. If you don't bring them truly good deals, they'll stop looking at your emails. If it turns out that you have a real talent for finding deals, without the cash to buy them yourself, wholesaling can be a good option. But, most beginners don't.

Your best shot of finding a deal is "driving for dollars," as Brandon terms it, looking for vacant/rundown properties in good neighborhoods with great school systems, then contacting the owners, who may have been considering selling, but not taken any action, yet.

Another key is to pick an area and focus on that, getting to know local values like the back of your hand. Redfin offers a free service that will notify you of new listings as they appear, and let you know when bookmarked "Favorite" properties go Pending, and their eventual sale price. Lots of good info can be found lower on the Redfin listing page with comparable available and sold properties.

I'm in Snohomish county and there are REI deals here outside the cities - I avoid the city of Everett like the plague that it still is. Mountlake Terrace, just north of Shoreline, is a close-in rising star with plenty of WW II housing still in place.

You're not likely to find SFR deals on the MLS, though. The listing agents usually know private investors and let them know first, before the ink on the listing agreement dries. My primary investment target is local farmland, from which unused and transferable residential development rights can be clipped and sold. There's no competition, so I don't have this challenge and do most of my shopping at home off the MLS. I don't even have to physically visit the property.

But, there are other ways to add value to a property, too, that don't necessarily require finding a screaming SFR deal. One option that I like is to find a light-fixer split-level SFR and convert it to a duplex. Typically, this will have a nice Owner's unit on the top floor with the bottom floor being a rental. A typical buyer will be a Baby Boomer with some cash who needs both a place to live and some supplemental income.

In any event, don't get locked into a single RE investment track by simply following crowd. You can also lose big money (and time) at this and you lock in your profit on the buy, not the sell. There are many investing options and "The riches are in the niches."  

Learn all that you can about everything and remember that the profits are all the same color of green. But, some of them are easier to create than others. 

Good luck!

The thoughts of @John Arendsen and @Account Closed and others are greatly appreciated. 

On top of and/or within my REI, I own 14 acres of prime drought-proof farmland just north of Seattle, am looking at some acreage to prep out in the boonies near a national forest and just getting into heirloom seed self-production. The problem, though, is that land is not portable and hanging on to it if the wheels come off the bus could turn problematic.

And, I'm thinking hard about keeping ready a fully-stocked trailerable sailboat, probably a MacGregor 26', to take to nearby Puget Sound, if necessary/possible. 

I certainly don't completely trust paper and electron-based assets, or anything else that requires people keeping promises, although that's unavoidable for wealth creation, at least while the lug nuts still hold.

Many years ago, Robert Heinlein wrote, "You never really own anything that you can't carry in both arms at a dead run." 

Does anyone have thoughts on what this last-ditch double-armload should be? The best I've come up with is seeds, beans, bullets and a cookpot, plus the usual everyday carry stuff. I just found a thin credit card-size flexible fresnel lens that fits in my wallet and will convert sunshine into fire.  That, and a knowledge of how to make moonshine, for universal trade goods, from almost anything starch or sugar. 

What else?

Welcome to BP @Mary Shea! I'll have to read your other posts - you have an impressive post-to-vote ratio. :-)

I can't give you any referrals, but am seeking these same services. So, I hope that someone can provide some good leads.

Just to share a related new REI opportunity that also needs these services, lately, I've been leaning hard toward adding significant value through converting fixer SFR's to Duplex. This in Snohomish county's SW Urban Growth Area, west of I-5, between Everett and Lynnwood. Basically, the Paine Field/Boeing surrounding area. I know of at least a couple of local BP'ers who are doing well with this same strategy in Seattle and it should work well in SnoCo, too.

Lots of 30-40 year old SFRs in this area that seem like prime candidates for conversion. It's not critical to get a screaming deal on the SFR to make this work, so there should be plenty of opportunities, as the county population grows by 10,000 every year for the next 20 years. Most of this growth is being channeled into the western urban county.

There's enabling land use legislation in the works: As of today, Snohomish county is nearing the end process of lowering the lot size minimums for Duplexes to the same size as SFR, instead of 150%, so conversions should be relatively simple to permit. We're probably looking at sometime in 2016 for this legislation to finalize.

Here's the county document that describes Planning's recommendation to the Council, which has not yet scheduled a briefing: http://www.snohomishcountywa.gov/DocumentCenter/View/30913

You can keep tabs on this progress on the county's Code Development Projects page (in about the middle of the page): http://snohomishcountywa.gov/2177/Code-Development-Projects

If anyone's interested in tag-teaming with this strategy, please PM me. 

The Puget Sound Business Journal just today published the latest home and condo prices and trends for the Puget Sound region of King, Snohomish, Pierce and Kitsap counties: http://www.bizjournals.com/seattle/blog/2016/02/ne...

In summary: (Due to a seriously constrained supply of homes for sale, down 31% year over year) "If you're planning to buy a house in Seattle this year, buckle up because it's going to be a wild ride." 

Multiple offers and bidding wars are common. This has led to overwhelming traffic at open houses, said Dick Beeson of RE/MAX Professionals in Tacoma. “There haven’t been any battles royal on the premises, but it could happen any day now,” he quipped.

The median price of houses that sold last month in King County (home of Seattle) hit $431,502, up 11.2 percent from January 2015. Median condo prices hit $282,250, up 18.3 percent. 

In Snohomish County north of Seattle, the median house sale price in January was $378,950, or 16.6 percent higher than the year prior. The median condo price was $259,750, up 21 percent.

The median price for a house in Pierce County to the south increased 10 percent to $242,000, and condo prices jumped 16 percent to $213,500.

In Kitsap county, the median sale price for a house went up 15 percent to $265,000, while condo prices hit $140,000. For condos, the increase was nearly 55.6 percent, though that figure is skewed by the small number of sales; only 11 condos sold last month.

Another recent PSBJ article mentioned that Seattle is the 8th most-expensive place in the country to rent and we've crossed the line where it's cheaper to buy than rent, if you can come up with the down payment. This appreciation is being driven by rapidly growing population, muchly due to tech and biotech company growth (both locally grown and CA satellite offices), not investor speculation, as in most bubbles. 

SnoCo, for instance, is planning for 10,000 new residents per year (on top of the current 700,000) for the next 20 years and they're all going to need a place to live. Most of the growth is being channeled into the urban western county. But, that projection was made in 2007, well before the tech companies started moving in, so it's probably low.

So, as long as the economy doesn't crash, there's plenty of upside, yet here. Puget Sound is a great place for B-class investing in both turnkey rentals and fixers (if you can find them, with all the local small REI-ers who are chasing deals).

There's dozens of major new mid- and high-rise mixed use developments happening, too. Many of these (in KingCo and SnoCo) are beng required to "cash in" density bonus credits from my REI niche of high-margin (10X+ arbitrage ROI) Transferable Development Rights from rural Snohomish county lands. That's where the really big money is, if you know what land to buy to "clip-and-flip" these TDR credits. I'm drowning in these multi-acre credit source land deals and wish I had the capital to snap them all up, while they last.

Hi @Patrick Britton I've been enjoying following your posts.

My main niche is Snohomish county farm and rural acreage, in order to "clip off" and sell the valuable Transferable Development Rights credits that I can harvest from it, without substantially reducing the value of the land. I currently own 14 acres of small lots near downtown Everett and have under contract another 40 acres near Arlington. Frankly, I'm drowning in lined-up arbitrage deals like this, without the capital to lock them all in.

Besides reinvesting in more acreage, while the deals last, I'm strongly gravitating toward reinvesting these TDR profits into doing residential value-adding through duplex conversions of fixer SFR split-levels, plus a "residential RV" rental pad, for long term hold-for-cashflow. This in the county's SW Urban Growth Area west of I-5 to Puget Sound, between Everett and Lynnwood.

County code already permits one occupied RV per lot for 180 days/year, but the county doesn't keep track of occupancy and a gravel pad/hookup, with the tenant's own RV, should be worth $800/month. As long as the neighbors don't complain, there won't be an issue, so the RV pad siting should be discreet. 

Between these inexpensive redevelopments into a 2.5-plex, the monthly cashflow should be about double than if it was still the original SFR, with an investment of not much more than a fixer split-level. Since the "bonus" commercial cashflow from this value-adding is mostly profit, the ROI should be stratospheric, which also opens the door to refinancing and walking away with a fast fat check at the loan's close.

The demand for this type of moderate housing stems from the fact that the county is going to be growing by at least 10,000 residents per year for the next 20 years (I think more), they'll all need a place to live and the established county policy is to channel much of this growth into the urban western county. The cities along 99 will be following suit in future years, but for now the county's SW Urban Growth Area looks ripe. Since this area is already built-out to a great degree, much of the new housing is going to have to be fill-in of existing neighborhoods and this is recognized by the planners.

A new county code revision nearing a final council vote is to reduce the lot size requirement for a duplex from 150% of the normal SFR minimum to the same as an SFR. So, that will open some nice opportunties to force appreciation. But, there are already a number of 1970's-1980's SFR neighborhoods (with split-levels) in the SWUGA that have already been rezoned "MR" with 15 units/acre permitted density. So this strategy seems to be workable immediately in at least some areas, once I get some TDR credits sold.

There are some other interesting rezones coming to the SWUGA, too. Especially if you're interested in building mixed-use, multi-family, transit-oriented-community developments at 58 units per acre. Basically, the same kind of 7 story mid-rises that they've been building in Seattle's Ballard neighborhood (30 minutes South), but with land costs of about 20% of Ballard's. To be permitted at this density, developers will need to acquire and "cash in" 36 of my TDR Receiving credits per acre. So, I'm especially interested in hooking up with mid-rise developers on or near Hwy 99 and other bus routes in the Snohomish county SWUGA. 

What's your take both my plan and Snohomish county REI opportunities in general?

Thanks!

Chris

I've got to agree with @Shawn Q. that these neighbors are prime candidates for foreclosure: common-law hubby resistance, deteriorated house condition, inflated value expectations etc. I'll bet that the backyard dogs are pitbulls. 

Your plan to just let things ride for now, but prepare to purchase a deeply discounted note from the lender, then solving this issue in-house, seems best. It will happen: "Time wounds all heels. "

Please keep us posted.

@Chris Mayfield 

Hi,

What's the neighborhood? Price? Terms?

Thanks!

@Sarah Grise Farmland is not an easy sell. Probably the best buyer opportunities are a close proximity to a large population center, for "agritoursim" businesses. 

What are the "run of the mill" advertising venues that have been tried, so far?