All Forum Posts by: Michael Haas

@Jim Doyle glad to hear you're getting started with househacking! Our family HouseHacked 4 times back-to-back in Seattle, and that process is the biggest reason that our rental portfolio is a big as it is today. There's really no better way to get started as a real estate investor, especially in a high-cost market like Seattle. 

Looking at your numbers, your 10% vacancy and 10% CAP EX estimates are a little high for our market - I estimate 3% vacancy, 5% CAP EX, 4-5% repairs personally. That said, the reason this deal doesn't work isn't because your vacancy estimate is high - it just doesn't work to get $3,000 in rent on a $600,000 property. Even at 3% mortgage rates this will not cashflow. Bad deal, so either try to negotiate $100,000 + off the purchase price or move on.
We've HouseHacked A LOT lol, so here's a couple recommendations for your from our experience. If you want to go more in depth just DM me!

1. You mentioned looking for a duplex, but in Seattle oftentimes properties with ADU's or DADU's perform better than true, traditional duplexes. That said, 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)
3. We'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. Establishing a short term rental / airbnb in part of the home is another great way to maximize rental income.

Cheers and good luck! And seriously, message me anytime if you'd like to talk more about house-hacking, it's definitely changed my family's financial life and the lives of almost 100 of our clients for the better!

Everyone's definition of "Heavy" is a little different - I talk to client sometimes who will walk into a house and say "this is way too big a project, I don't want a heavy rehab" when I know for a fact that I could finish that project in 3 weeks LOL. 

That said, if its the Bigger Pockets book that you're referencing know that those numbers are not accurate for our market. Many of the "estimating rehab costs" books are written by flippers working with Texas, Florida, or similar 1990's tract homes - for those flippers 1970's is "OLD", while in Seattle 1910 is "OLD". Much more expensive to fix up a 1910 house than a 1970 house.

Relying to much $/sqft estimates is a great way to lose money as a flipper haha, but here's you some rough numbers to get started: $45/sqft is cosmetic, $65/sqft is cosmetic+major systems, $85/sqft is full gut, $105/sqft is full got on a high end flip, or on a very old (1910) house. 

You didn't ask this question, but I like making money and I'm guessing you do too, so here goes - Flippers are loosing their shirts in this market, so be careful. If you came up to me and said "Hey Michael, I'm new to real estate investing and excited to get started! What should I do?" I would not tell you to start flipping. The blunt truth is that Seattle is a highly competitive market, and unless you have strong connections in the construction industry, sourcing off market deals, or some other competitive advantage you're as likely to lose money as make money as a newbie.

That said, there are a ton of ways to make money in a declining real estate market - DM me if you want to talk about those! I flip properties, but in this market I'm focused on other, more profitable strategies, and am not actively doing flips. 

Just my two cents. Hope that helps a bit, and good luck!

@Charlene Atlas yes, the Eastside is a appreciation play, not cashflow - as Adrian mentioned the rents are comically low for the market value of the properties there. I live in North Beacon Hill - have you thought about Judkins Park, Beacon Hill, and the other neighborhoods just across the i-90 bridge from the Eastside? Rent to price ratios are better there, and I can get to our office in Bellevue in less than 20 minutes.

A piece of advice - it sounds like you'll be living in this rental property for about 6 months, and (ideally) you'll be holding it as a rental for 30+ years after that. I'd prioritize the rental, not your personal housing, and either commute for 6 months or just rent an Airbnb in on the Eastside and buy your rental where it makes sense. Any money saved by not having to pay for a place for your family to stay is going to be overshadowed by the Eastside not having the cashflow you're looking for.

That said, there are some strategies that work on the Eastside. Kirkland is a great example - they allow development of TWO detached DADU's, and also allow you to condominiumize the lot to sell the house, DADU 1, and DADU 2 all separately. Cashflow is still weaker, but you can bag $500,000 or more of equity building out a Kirkland lot with that strategy. 

Happy to talk more - feel free to shoot me a DM. Cheers!

@Kera Takacs as Adrian has mentioned, what Seattle lacks in Landlord Friendliness it makes up for in development opportunities - the best STR's tend to take advantage of the favorable ADU & DADU codes to get multiple rentable structures on a single lot.

When you hear investors S**t on Seattle, be sure to ask why. Some of them have legitimately owned rentals in the city and sold them because of difficulties they've personally experienced - others have never owned property here and just read the news headlines. The news isn't made to tell the truth, its made to catch your attention, and horror stories catch a heck of a lot more attention than "business as usual" stories. That said, I know landlords here in Seattle that have had tough situations thrust on them because of the city code, and I am by no means characterizing Seattle as "Landlord Friendly", I'm just saying that a couple of restrictive laws and a difficult city council aren't enough of a reason for me to NEVER invest in one of the fastest growing cities in the United States.

PS: I own 6 short term rentals, 2 of which (the maximum allowable by current city codes) are in Seattle. I love my Seattle STR's and have had no difficulties with them, nor have I had any personal difficulties with my rentals in the 6 years I've been landlording in Seattle (Knock on Wood!). I think its important that those of use that are enjoying smooth sailing speak up as well, otherwise all we'll hear about are the horror stories - much like how all yelp reviews are either 5 or 1 star. There's lots of quiet people in the middle!

@Bryce Henson - way to put yourself out there man! I'm always happy to work with people that are driven to succeed and hungry to learn. I'll shoot you a DM in case it makes sense to talk more. Cheers!

Hi Lisa - I'm an investor and developer, I'd love to run some numbers on your property with you and give you an offer. Best case scenario I can buy your property, worse case scenario you can see how I evaluate and value properties and take that information to be better informed about what your property may be worth! Just shot you a message :).

@Paras Newbe great questions - DADU regulations vary by City & County, with Seattle, Kirkland, Bellingham, Tacoma, and Burien being the most DADU friendly in our region. All the areas I just listed allow DADU's and do not require that the owner live in the DADU or the main house (aka, both units can be rentals if you'd like them too). Most other cities have more restrictive DADU rules than the list above, so you'll want to work with an agent that has experience with ADU's and DADU's, and look at the code for the area's you're interested in.

For your HOA question - an HOA is only required if you want to sell the two units separately, If you don't mind keeping the DADU and Main Home under a single owner you don't need an HOA. Building permits take about 3-6 months (or shorter if using pre-approved plans) and are very easy to obtain, especially compared to non-DADU new construction.

I've gone ahead and written out the DADU code for Sammamish as well :). Here it is:

SAMMAMISH
One AADU or DADU allowed. The ADUs must not exceed a floor area of 1,000 square feet when
detached, except when one of the dwelling units is wholly contained within the existing residence, in which case the floor area must not exceed 50% of the existing unit. No additional off-street parking space is required when the parcel contains four or more parking spaces. Owner occupancy is required in one of the two units. sammamish.us/attachments/pagecontent/36778/17280.pdf

Let me know if you have any questions! My wife Jess & I are building currently building our 3rd DADU in Seattle and are happy to share what we've learned and what is working for us.

@Travis Mullenix pricey is relative. If a Hard Money Lender charges you $45,000 in interest and points over a 8 month period, allowing you to flip or BRRRR a property with profit / equity growth of $300,000, is the interest rate to high or is it a fair price to pay for giving you the means to execute on a good deal?

What if, on the same project, the ability to offer cash and close in 2 weeks allows you to purchase the property for $25,000 less than a conventionally financed buyer? This isn't a hypothetical, this literally happened to a client last week. If you get also a $25,000 discount on a property is $45,000 in interest a fair deal?

All this to say, there's lots of variables at play here besides just the points and interest rate. Hard Money is way "cheaper" than most people realize when you factor in the speed, flexibility, and negotiating power cash gives you.

@Matthew Jaeger it can be hard to find condoized ADU, SFH, and DADU comps because the MLS and listing agents selling them often don't categorize them consistently. We have a couple of keyword searches that pull the vast majority of projects, and have an appraiser working on a valuation model that should apply to your project. Feel free to PM me and I'll grant you access. Cheers!

@Paras Newbe if you live in Issaquah I would 100% be investing in Seattle & Kirkland, both of which allow construction and condoization of DADU's. That is, by far, the biggest opportunity in our region right now for cashflow, equity growth, and ease of management / construction (DADU's are new construction = fewer surprises!). Happy to talk with you more about this strategy if you'd like to shoot me a message. 

Your criteria are similar to mine, and I can say they are achievable in our region. We target cashflow including all expenses & property management, and/or 20%+ equity creation so that every project boosts net worth by $100,000 - $200,000 and has the option to BRRRR & re-use your capital if you're looking to acquire multiple properties. That's one of the things I love about investing in our region - with certain strategies you can get appreciation / value add without having to sacrifice your cashflow.