All Forum Posts by: Vasily R.

@Vaughn K.'s general sentiment that SF and Seattle are probably near the end of their appreciation boom, but I also think this discussion eventually comes down to people's personal situations and risk comfort levels. Some people are simply comfortable with an investment that might take many years to pay off and even that without a certain guarantee. Vaughn and myself are probably more on the conservative side of things and prefer a safer and more boring cashflow positive market, and accept the reality that it may potentially lead to lower appreciation returns. Of course, everybody wants both, and if you can predict where you can get good cashflow RIGHT NOW and also see an accelerated appreciation as well, well you've then hit the jackpot. As a techie I am partial to the DC area and potentially some other western cities resembling Seattle as it was 15 years ago, e.g. Portland. 

@Ali Boone thanks, I was just about to post a reply about this specifically. I think new investors, including myself, get pretty hyped up over the idea of house-hacking from all the podcasts and the youtube videos, but the more I read about it the more I am becoming skeptical, or at least more careful. For instance, I realized that if you don't actually *need* an FHA loan, you probably shouldn't get it, because over the long term it is so much more expensive than a conventional one due to the upfront and monthly insurance payments associated with it, not to mention that you look less appealing to a potential seller. Nerdwallet was kind enough to list both the interest rate AND the overall APR for 30yr fixed conventional vs FHA and that tells you that looking at the interest rate only is misleading and actually harmful to your long-term wealth building. These loans are praised left and right as being very compatible with the house-hacking strategy, so I'm starting to learn that some of this "common" RE knowledge is starting to become outdated and must be taken with a grain of salt. And your article seems relevant to my situation so I'll put it on my reading list, thanks!

@Michael Haas

Could you elaborate on the SFH strategy you outlined? What do you mean by 8+ bedrooms? Is it the situation that Adrian was describing above where each bedroom has a different occupant? That sounds like a gigantic house, wouldn't those usually be McMansions that cost way too much to begin with? And how many kitchens and bedrooms would that have? Is it a roommate type situation where everything is shared with strangers? Any more info would be appreciated. Thanks

@Suzanna Smith I think you hit the nail right on the head with the speculation vs investment contrast. That feels correct, and what the reality is (and what my current agents are trying to sell me on) is that in this market we are mostly investing in an uncertain future reward based on speculation of the market. As BP has taught me, cashflow is king because you can very accurately calculate what your cashflow/ROI will be on a property, since all the data you need is already out there.

Sure, things will get better for me after something like year 6 for me because then I would hit 20% equity and refi and get rid of the expensive FHA insurance, but even then, not to mention the refi fees, my data is still not projecting a positive cashflow. That's how bad it is. My only way out would be to sell it eventually, and that's a marathon I don't want to run.

Sounds like you are well aware of the risks and benefits and have a concrete plan, so I'm sure it will work out for you. Good luck.

I learned so much from this post. Thanks everybody. Vaughn's reply above especially is making me wonder. I'm not tied by anything in this city other than my job, and since I got my green card after moving from Canada's east-coast 5 years ago (where my family resides), I have almost no particular attachment to this city. I am focusing on building wealth while I'm relatively young, and sounds like Seattle is just a harder place to follow the real estate strategy to achieve my financial goals. Tech jobs can be found all over the country, and perhaps taking a pay cut isn't such a bad idea if I can trade that for better culture, lower crime rates, better real estate opportunities, etc.

Meeting up with a different friend involved in real estate to give me a different perspective, but so far I'm definitely holding to my guns.

This actually makes a lot of sense. Renting a room for each person in a 8-br house seems like a rat cage though, doesn't it? Even if I live in an ADU, I can imagine a lot of drama and repairs would be required in such a situation, but you gotta do what you gotta do I guess.

Keith, I feel ya. What you're saying is in alignment with what I've seen, even though you're looking at a slightly different market segment. From what I hear, the FHA appraisal process is much more strict than a normal appraisal, so it's quite possible that a deal could fall through if the FHA appraiser says that the house just doesn't meet the required standard of living mandated by HUD. This seems like a good article on the matter: https://www.valuepenguin.com/mortgages/fha-appraisal-requirements

Interesting point about going up north not being worth it because that (or going South) was going to be my next strategy. I just don't feel like I have the experience to go hunting for broken houses that require renovation to make a profit. Location would be my best bet right now., and even that seems to be a no-go.

The only reason I got a good pre-approval is because the future rental income is calculated in my total income and also I have a tech salary. I am totally an average Joe otherwise and I really want to understand what people mean when they say you gotta get creative in this market. Can anybody provide any specific examples?

Thank you Marc, 

The negotiation part is a good point but aren't most properties here sold at above list price? The 1.4m UW quad is my favorite and I just now did a calculation assuming we negotiate for 1.2m, which is an amazing negotiation, but the numbers are as follows: new mortgage @ 3.13% = 4,964. Even though that's now less than the rental income, the taxes and insurances still bring the net income to -$1,678. 

What you're saying so far is confirming my understanding that you really gotta get scrappy here and look for properties that would turn off 99% of other potential buyers.

I am working with two agents who showed me a bunch of MFH properties: mostly duplexes, some 4plexes. One in UW, many in Greenlake, some in Cap Hill/First Hill and a couple in West Seattle. My plan is to house-hack with an FHA loan. When our loan consultant came back to us and said I got a pre-approval for almost all of them, I got excited and started crunching cashflow numbers for each property, as per our overlord Brandon Turner.

And then it hit me: the numbers just didn't make sense. Everything is red, even if I massage the numbers in multiple ways. Too many posts here are too vague, so let me give you some concrete data. Here is an exact copy paste of my excel sheet, which took me multiple hours of labor to create:

All this info is from public websites found on Zillow, government websites, etc, so don't feel like I'm giving any free lunch out here, but it's all to make a point: do you see how all the numbers in the right-most column have a minus in front of them, except the Everett property I added just for contrast? That's the problem here. I am glad I did these calculations because my agents were getting all giddy about me making an offer on any of these. Mind you, this is a best-case scenario, and these numbers don't even account for the fact that I'll need to live in one of these units. Even if I raise rent aggressively and assume the best FHA rate I could find, low repairs, low utilities, low vacancy, the numbers are still bad. Sure, I'd make a decent profit from appreciation from a sale eventually (maybe), but all the while I'll be bleeding money for who knows how many years.

Someone please tell me what I'm missing here. Plenty of people in this forum are bragging about easily getting good cash flowing deals in the Seattle metro area. Is that all bs? 

Do I really need to dig deep and find pieces of crap that need full renovations (I've seen a few of those and they still cost a fortune), BRRRR or some other fancy strategy? Is FHA MFH house-hacking just not a thing in the Seattle metro area? I am a city guy and don't want to move far; will I really need to concede that privilege? I am new and don't want to BRRR yet. Besides, FHA appraisals are strict and it probably wouldn't work anyway. What other strategy works out here? My agents were so stumped by my observations that it's been 2 days since I've heard from them. It's honestly making me suspicious of their honesty from the start - surely they should have realized this fact long ago already, being in the market for 8+ years?

Sorry for the frantic post and thanks in advance for all the kind wisdom.

Hey, new investor here who almost got to 1 but then realized that all the stuff my agents found for me would not make any cashflow at all. Would love to learn more about what others are doing in the Seattle area.