All Forum Posts by: Chester Knapp

Thank you for your replies.  I believe proper etiquette is to follow up via PM, which I will do.

I am looking for a Real Estate Agent that has expertise or experience in buy and hold rentals in the Seattle area (my current target is south Seattle, from Columbia City to Rainier Beach, although I will consider revising my focus area based on a discussion with RE Agent).

My target is a duplex to 4plex with 2-3 bedroom 1.5ba+ units in properties with BRRR opportunity.

Please let me know if you have recommendations, or fit the bill yourself.  As a client I like to get pretty honed in on my criteria and systematic about determining offer price.

Thank you for the advice.  @Jeff Wallenius I have set up an initial call with IRA Advantage. Having looked at their online content they do seem quite knowledgeable.

@Bernard Reisz and @Allen Fletcher -  thanks for the perspective.  Adding yet another hurdle and time lag once I find the property would be a pretty big disadvantage to rolling over to a self directed custodian later.

I am switching jobs, and have the opportunity to take my employer matched retirement account (a Municipal Employees Benefit Trust, used in lieu of Social Security) to invest in real estate. I can rollover the funds into an IRA. Do I need to transfer the funds now into a self directed IRA custodian, or can I rollover to a custodian like Vanguard and then transfer to a self directed IRA later when I find the property I want to buy?

I am also looking for a financial advisor who can help navigate this and help advise on the best legal structure for a real-estate partnership using an IRA. I'm located in the Seattle area.

Curious - is that 70% of ARV based on list price, or final sale price? We've put in offers on a couple single family homes that had major repairs needed but attractive list prices, and they ultimately they went for 20%+ over asking.

[Sorry for double post: solved the mystery of the @mention after the fact]

Thanks for your help and insight everyone! Looks like my numbers weren't too conservative, and actually left out some important items (property management, capital expense, accountant). I think I will have to shift my strategy to be more in tune with the market, focusing more on appreciation since cash flow is not something Seattle is offering in any quantity.

@Barbara G.; @Yinan Q. - I was treating 'maintenance' as a combined incidental and capital expense budget. Do you have guidelines or resource that you would recommend to help set the budgets for each separately?@Yinan Q.

@Elizabeth Colegrove; @Adrian Chu; @Melissa Melia  

-Yes I think "thinking outside the box" is going to be necessary if I want to have a cash-flow positive duplex in Seattle from day 1. I think Air b-n-b has the most potential to goose returns, and I have thoughts about another property where this would work better as a strategy. (Biggest challenge is Air b-n-b seems to have the most potential in central neighborhoods where prices are in the stratosphere).

Thanks for your help and insight everyone! Looks like my numbers weren't too conservative, and actually left out some important items (property management, capital expense, accountant).  I think I will have to shift my strategy to be more in tune with the market, focusing more on appreciation since cash flow is not something Seattle is offering in any quantity.

@Barbara Goodman @Yinan Q., I was treating 'maintenance' as a combined incidental and capital expense budget. Do you have guidelines or resource that you would recommend to help set the budgets for each separately?

@Elizabeth Colegrove, @Adrian Chu, @Melissa Melia, Yes I think "thinking outside the box" is going to be necessary if I want to have a cash-flow positive duplex in Seattle from day 1. I think Air b-n-b has the most potential to goose returns, and I have thoughts about another property where this would work better as a strategy.  (Biggest challenge is Air b-n-b seems to have the most potential in central neighborhoods where prices are in the stratosphere).

I am considering a purchase of a duplex as an owner occupier in a central Seattle neighborhood (limited by a commute to Redmond). I am a newbie, and would like a few more experienced eyes to look over the numbers and point out if I've missed something, whether the estimates are too conservative, or just conservative enough.

Here are the numbers:

• List Price: $605,000
• LTV: 85%
• Est. interest rate: 4%

• Upper Unit (2bd, 1ba, 1040sqft) $1,850
• Lower Unit (2bd, 1ba, 970sqft) $1,330
• Total income: $3,180

• Vacancy (@5%): $160
• Taxes: $345   (From county assessor)
• Insurance: $95  (Estimated)
• Maint (@1%): $500  (May be high, however house was build in 1901)
• Water/Sewer/Garb.: $150
• Total Expenses: $1250

• NOI: $1,930
• CAP: 3.9%
• Rent Multiplier: 16

• P&I: $2,435
• Cash flow: -$505

I estimate the rent's are low by about $200 to $300 in total - the lower unit seems particularly under-priced.  Offering and getting the property at ~$560k (possible, if unlikely), combined with getting rents up to market value, gets it extremely close to cash flow neutral (which looks like a lofty goal in Seattle - this 'deal' is par for the course for the other 5 recent sales I've analyzed in a similar way).

• Anything seem glaringly out of place with the numbers? (maint. seems high to me)
• Anything else that would be worth taking into consideration?
• Is this "deal" mediocre enough to wait for something better?
• Is looking for cash flow in Seattle a fools errand?

I spoke with the inspector who issued the violation - he was very helpful and easy to work with.  Here is what I found out:

1) The sale of a home 'resets' the compliance timeline 

2) They are very interested in working with a new owner to get a home compliant, and they are not interested in chasing down any other 'unpermitted' work done by the seller

3) Common sticking points he identified:
-Complying with the off street parking requirement (this home has enough parking)
-Providing adequate egress from the bedroom in case of fire (this home meets the 'size' requirement for the bedroom window, only remaining concern is there is a 6-8' drop to ground level)
-5/8's inch fire resistant material would be required for the ceiling

This is in line with what I was budgeting for...  I will say calling DPD early was very helpful.

Hoped I would have a better first post:

I am (was?) about to make an offer on a nicely updated home in Seattle with a nice accessory dwelling unit / mother in law apartment.  I intend to occupy the top level with my family, and rent out the bottom.  It is in an area that may potentially change to multifamily, opening up a path to convert to duplex.

However, a quick permit search prior to making an offer revealed that the owner had not received a single permit for any work conducted, and received a code violation notice for the ADU last week with compliance due in about 30 days. Here are my questions:

1) What are the risks at this point?
I'm assuming I would likely have to remove the stove and fridge to comply with single family code, and the go about the process of permitting an ADU the right way. How likely is it that I would then also have to bring other unpermitted work (unrelated to the ADU) up to code?

2) Assuming risks are reasonable, what is a good strategy if I follow through and make an offer?  
This is a 'hot home' with multiple bids and pre-inspections, and it is unlikely that any other buyers are aware of this information.  I am interested in the home, it fits my strategy very well, but I am in the situation of having to out-bid buyers who do not have this negative information.