@Suzanne - I know people are still big on the appreciation play in Ballard, Queen Anne, etc. but a property like that with a CAP of less than 3.5% doesn't seem very attractive.

The rent rent/price ratio should be viewed, just like a cap rate, as an indication of the risk of the asset and/or market.

If you see more than 10% of complexes having a cap rate higher than 8% and an overall city occupancy rate under 85% it's not a good place to invest unless you are buying to change the property class.

It may seem that way, however if you can crunch the numbers and know how to get a cap rate, no longer in unicorn city!

I just did my first ARM (7 year fixed, 30 year amortization, 4.5% with a cap at 9.5%), and could hardly stomach that when I looked at the worst case scenario--it would go to negative cash flow by $200-300/month, and those rates are not too far-fetched.

With the tax reform bill from 2017, there's a cap on the interest deductions that you personally can take so you might not get the same deduction if you're using a HELOC.

Okay, so to clarify so I am 100% sure what you're saying: Say my basis is $100,000I spent $5,000 on a cap ex, say a new roof.I just add $5000 to my $100,000 basis to create a new basis of $105,000 and my depreciation is now $105,000 / 27.5 = $3818, correct?

This was a total rehab of a cape into a colonial. 

Figure out the GOI, estimate an expense ratio using what you know about operations, and throw a cap rate on the NOI based of the multiple of intangibles that drive rates in your area. 

They'll have to recapture all depreciation taken and have a cap gain otherwise.When did they buy it and for how much?