All Forum Posts by: Michael Smythies

Often times building relationships with high quality general contractors over time will yield better results than doing both inspections. This will also save you money over the long time if you plan on repeating the process. 

Find a contractor you can trust and work with consistently and they will be worth their weight in gold. 

Great to see the numbers on this one! Mount Baker is an awesome community and it's encouraging to see you managed to find this deal on the MLS. More and more deals seem to be popping up on the MLS with current market conditions. Exciting times!

 Hi Kyle, 

Purchasing a secondary home or 'vacation home' is a great way to start something like a short term rental. Use it as a place to vacation to whenever you'd like and set it up as an AirBnb for the rest of the year. 

Where in particular are you looking to purchase? Here is a blog post I wrote about on a waterfront property located on Anderson Island that has the potential of cash flowing $2000/month with a purchase price of $650k. Let me know what you think! Here is a link to the property: 10223 Totem Way

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Located on one of Puget Sound's secret islands, this amazing waterfront property has breathtaking views of Mt. Rainier and much of the south Puget Sound. With recent updates, new flooring, a fresh coat of paint and updated appliances, this home is turn key and ready to be enjoyed. Imagine owning a cash-producing, beautiful waterfront island home with stunning views and private water access for only $65k! This almost sounds too good to be true but let me show you how you can make this a reality.

Here are the numbers...

Purchase Price: $650,000

Downpayment: 10%

Interest Rate: 5.5%

Monthly Mortgage: $3,321.57

Avg. Nightly Rate: $325/night (not including cleaning)

Avg. Occupancy: 60%

Yearly Revenue: $71,175

Monthly Revenue: $5,931.25

*These numbers are conservative figures based on AirBnb data from nearby comparables

Utilities: $360/month

HOA Fee: $60/month

AirBnb Service Fee: 3%

Net Operating Income: $5,333.31

Monthly Cash Flow: $2,011.74

Total Return in Year 1: 93.97% or $61,080.71

TLDR (Too Long Didn't Read): If you bought this home with a 10% downpayment ($65k) and set it up as an AirBnb, you could cash flow approx. $2,000 per month and own a beautiful waterfront home that you can stay in whenever you want.

Hi John, 

Seattle has no shortage of homes or private suits for rent. I suspect that your client will have no problem finding the right place. As the market here has become less advantageous for sellers in the last few months, rental inventory has seen a big increase. Per David Drake's (#1 property manager in King County in rental volume) monthly email, since July 1st, there has been a 104% increase in active listings compared to the same time period in 2021. 

With a huge increase in supply, rental rates have taken a slump. This could be a great time for your client to get a great place at a discount as compared to a few months ago. 

I'd encourage you and your client to look at David Drake's website where you can search all of his companies rental listings. The website is:  www.daviddrakepm.com. 

Thank you for your response Chris. I probably should have been more specific with my question. I was framing this question more so in the context of people with streams of income coming from rental properties. 

How is it that some investors are able to afford having dozens of rental properties? Presumably they're bypassing DTI restrictions in some capacity.

Hi BP, 

I get this question over and over again from new real estate investors that are just starting out - how do I get around DTI limitations? In order to buy more real estate by means of conventional lending, you have to significantly (and sometimes unrealistically) increase your income. Many new investors, unless they have a very high income, will face this issue after the 2nd or even 1st house they purchase (especially in more expensive areas).

What are the best ways of thinking about this issue? And what are the more common ways of bypassing these limitations? Is private lending the best way to do this or are there better/more beginner friendly ways? 

Thanks! 

Hi Chaz, 

Being a real estate investor focused forum, I think members of BP would greatly appreciate how you as a lender can benefit them as an investor. As I'm sure you are well aware of, the issues that retail home buyers/sellers are significantly different than the ones that investors face. 

Personally, I think the question of how to get around DTI limitations for new investors an interesting one. This is an issue that many new investors face.. how do I get around paying for more and more mortgages when I have a DTI of 50% that restricts me.

 I second this! This is very important. Often times, in the more expensive markets, creativity can substitute capital. Get creative and you can find good investment properties everywhere. Would you agree Sherief?  

Hi Azu, 

As an investor friendly broker here in the Seattle area, we have some boots-on-the-ground insight into the current market conditions in this area and what sort of strategies investors are having most success with. 

It may be difficult to complete a 'perfect' BRRRR in the Seattle area given the high prices but it's not impossible. However, we typically will see clients do BRRRR deals who take out 80-90% of capital invested rather than the 100% in a 'perfect' situation.

Our focus is to analyze investment potential properties in the greater Seattle area and connect clients to those particular deals. Once clients get into contract for these homes, we have a book of vendors/contractors whom we trust and work with on a consistent basis who we can connect you with. This typically makes the process easier and smoother on the investor and allows you to move quicker. 

Hi Mazza, 

Interested to hear more about what it is that you are looking for in the Seattle area. I am investment focused real estate agent in this area. Curious to hear more about what you are looking for.