Any landlords/investors in the Seattle area?

Hi all,

First off, let me just say thank you to everyone who takes the time to share their insights and knowledge on this board. I’ve learned more in the last couple of months reading this board than I have reading most investment books. The info on this site is invaluable, and I consider myself lucky to have found it. On to my question…

Is there anyone on the forum who owns investment properties in the Seattle area? The reason I ask is, first and foremost, this is the area I live in so it would be my investing area. The second reason, however, is because the research I have done so far seems to indicate that rent prices don’t really keep up with sales prices. If I’m not articulating that correctly, let me give an example:

I bought a home last year and was fortunate enough to get a very low interest rate (3.625%). If I were to put this home up for rent, however, I most likely wouldn’t even break even on the month-to-month basis (would probably be $100 to $200 in the red). If I had a “normal” interest rate, I would be losing a lot more than that. I know the first few years of rental ownership don’t often generate a lot of income, but it seems like in this area you would actually lose money if you tried to rent out a place (unless you put a huge down payment on the house). I also know that when looking for investment properties you want to find a good deal, but even with getting a deal it seems like it would be hard to break even in this area.

Does anyone have any advice/recommendations? Are there areas that are just “bad” areas to invest in? I’ve heard investing in others states, or even countries, is a bad idea, but would that be something to look at if you can’t at least break even in your own area? Or am I looking at this all wrong? If I am, PLEASE feel free to tell me that. You can be as blunt as you want, I am here to learn and appreciate any and all info you guys are willing to share.

Thanks again for all the information, and for taking the time to read this.

I didn’t invest in RE out there, but did live there for several years. Obviously it’s very expensive there. Very very difficult to invest in a region like that for cash flow as you’re seeing.
There are several reasons why someone may invest in a rental property there that won’t cash flow.
They might be looking for price appreciation down the road.
They might have bought the property many years ago when prices were lower and the property actually will cash flow.
They might be homeowners who got stuck with their house after the housing crash, but had to relocate out of the area. Renting it for a loss is better than losing it to foreclosure for them.
They might be taking a loss on REI to offset profits with another business.

It’s generally better to invest in your own area so you can manage it and keep an eye on everything. Sometimes the numbers don’t work for that. Cashflowing properties can be found in many areas of the midwest and south.

Thanks for the response, Justin. Yeah, everything you said seems to be what I’m finding out, at least in regards to cash flow on properties. If/when I get into this, I will most likely want to be a buy-and-hold investor. I 'm not going to rule anything out, but that is the type of investing that interests me most. And it seems to be hard to do that around here.

If anyone else has ideas/comments, I’d love to hear them. You don’t have to be specific to the Seattle area, I’m just curious to hear responses from people who live in areas where the rents don’t typically keep up with sales prices. Do you invest outside your area? Do you make really large down payments (which might hurt your ROI)?

Thanks again for reading/posting…

We started out investing away from where we live. We bought a small apt building near where I grew up. My parents still live close to there and the building has been good to us. My parents show units when they’re vacant, but that’s about all they have to do. We hire out any necessary repairs. I’ve taken time off work in the past to go back there and rehab some of the units.
Most of the time, it’s difficult to make things work out from across the country. We’ve been fortunate to have good tenants there. Anywhere you decide to invest, you’ll need to find your own team. You’ll need to find a plumber, HVAC person, electrician, someone to show the units, etc. A good handyman might be able to handle all your repairs depending on licensing requirements for repairs in your area.
You can expect to make around 20-30% down payments to get into an investment property. That seems to be pretty normal now. Making large down payments will really slow down how quickly you can acquire properties. Local banks are a good place to look for loans.

Don’t know how tied you are to the Seattle area, but you could always move somewhere else where it would be easier to buy affordable rentals.

Good info, Justin. Thanks again. I’m sure you’re right in that it would be harder to do everything (manage the property, hire repairmen, etc.) from afar, but it sounds like you had/have a pretty good setup with your parents being able to help out in your absence.

As for my ties to the area, I doubt I will be moving anytime soon. I’ve never really lived in the Midwest or on the East Coast, but I’ve lived up and down the West Coast and this is by far my favorite area. I have family here, bought a house here last year, and just really love all that the area has to offer. Even if it made more fiscal sense to move somewhere where rental returns were better, I wouldn’t do it if it meant I had to sacrifice on quality of life.

But as I said before, I haven’t even started so I really can’t rule anything out. I know there are people who invest here so there IS a way to do it, I guess I just have to figure out what methods they employ.

One thing I know for sure, I certainly get jealous when I see people talking about scooping up houses for $50K. It’s very hard to find anything under $250K around here. :shocked

Thanks again for the info. I appreciate it!

Seattleguy,
Keep looking for bargain properties. Read the newspaper, and drive the ads. What you want is a lower-income, older area that is on its way up. I visit Seattle occasionally (family) and remember driving by parts of town that looked like good investment areas–mixture of single family homes, duplexes and apartments. Older neighborhood with trees. Lots of houses with room for improvement. Close in to the city. They did not have that high-priced manicured look. THERE ARE BARGAINS BUT YOU MUST FIND THEM.

When you find a part of town that has the prices and potential that you seek you then need to become the expert on that area. Call on the “For Rent” signs and ask those landlords if they know of any good deals or have any property that they want to sell. Ask them if they have a minute to talk to a beginning investor. Be chatty with the local grocer, barber shop, gas station owner.

Look for a FREE unit. By this I mean that you find a partially converted garage that could be a unit; a boarded-up outbuilding that could be a unit, an older floor plan that could be 2 units. That extra unit is like a gold nugget just waiting to be found. A single family house with a potential free unit is how you change an alligator into cash flow.

Stop in at your county building and get a copy of the zoning code and restrictions for your rental area. Never buy unless you understand the zoning.

Good luck on your search. Don’t forget to calculate cost per sq. ft. and rental value when you drive around. Keep a notebook. For me, the search is total enjoyment, like maybe gold-prospecting. After a few hours or days of driving and phone calls you WILL become a local expert. That’s when a “great deal” will just drop on you. Because you will KNOW when you spot that glitter of real gold.

Furnishedowner

Thanks, FO. That is GREAT advice!

There is actually an area about 15 minutes north of here that may very well be what you’re talking about. It’s a more “blue collar” suburb of Seattle and there is a higher crime rate than some of the other suburbs, but it’s a liveable area and the town is trying VERY hard to revitalize the downtown area. It’s actually becoming a place that people will visit to go out to eat, have drinks, etc. And because it isn’t as “nice” as some of the other suburbs, real estate is cheaper there.

To take it a little further, I almost bought a house there about a year and a half ago when I started my home search. I was looking at an old Victorian house that was 2 blocks from the water, and had a great view of Puget Sound from the second story. Even better, the house came with a big lot right next to it that I could have kept and built on, or sold to an investor. The only problem was that it needed A LOT of work as it was a foreclosed home and there was excessive damage to the home. I just didn’t have the time, money, or know-how to make all the repairs. I’m guessing someone with good rehab skills probably bought the house and made themselves quite a bit of money.

Thanks again for the information. I appreciate it!

Wouldn’t happen to be talking about Everett would you?
The other not so nice area there is Tacoma. Used to be a joke between my wife and I about the news…anytime they started a story about a murder/rape/etc, one of us would say “in Tacoma.” Then the news person would say it happened in Tacoma. Tacoma has a nice bridge and the dome for concerts, but that seems to be about it.

Good call, Justin! I was talking about Everett. They still have a ways to go there, but the downtown area is a far cry from what it used to be. It used to be old and rundown, but now there are a lot of new businesses, high-rise condos, and just new construction in general going on.

And you’re right about Tacoma, too. I try not to spend too much time there. I have relatives who live on the outskirts and the horror stories they tell me are enough to keep me away. Aside from concerts at the Tacoma Dome or the occasional Tacoma Rainiers game, I typically stay away.

Seattleguy,
Sounds like Everett is the place to start–fixer 2 blocks from the water, wow! Where there was one, there will be more. I remember Everett as being very green and pretty, place where you take the ferry, right?

Remember that this is a buyer’s market. Probably some banks have foreclosed houses that they are sitting on. Probably there are jobless homeowners desperate to get out. That is when you get in. Help someone out by buying their place.

Don’t forget to scour all the newspapers including the little budget free ones. Walk and talk like a buyer…“I’m looking to buy a rental house here. Do you know anyone who needs to sell their house?” Do this when you stop at 7-11 to buy gas, do it at check-out at the grocery store. Just do it. It’ll become natural if you do it enough. Real estate–you have to want it to get it.

Get some business cards printed up ($11 here at OfficeMax). “Seattle Guy looking to buy Rental House in Everett–Call MY Cell Phone 000-0000 and Leave Message Anytime”. You get the idea. Spread those cards around. Don’t have flashy cards, clothes or a car. Don’t look too money-ed or you will scare off some sellers as being too slick.

Good luck and let us know how it goes. We need a new person on this site who is ACTUALLY DOING SOMETHING to come back and tell us how. This inspires all of us and that is what life is about.

Furnishedowner

Just stay away from the Casino Rd area. That street had lots of crime when I lived there. Good amount of military population there with the base. Lots of potential renters with good pay and job security. Plus you have recourse if they don’t pay or damage your property. The military looks down on their people causing problems out in town and will force them to make the situation right.
You might be able to look out east of there a bit to find some cheaper prices (Lake Stevens area).

FO,

Believe it or not, Everett is one of the few cities in the area that doesn’t have ferry service. There’s a stretch of Everett that’s on the water, but there are no ferries there. However, there are ferries in cities close to Everett (Mukilteo, Edmonds, etc.), so I’m sure you’re thinking of the right area.

Again, thanks for all the info! You’re bringing up ideas and information I hadn’t even considered! I would love to put all this information to use right away but it may be a while before I am able to do that. I have to save for a bit to get a sufficient downpayment, but once I do that I will start putting all of this good information to use!

Justin,

You’re right, Casino is probably the worst area in Everett. I’m steering clear of that area. The funny thing about Everett though is that, for the most part, a lot of the bad areas and good areas are intertwined. For instance, parts of South Rucker Ave. are pretty bad and not somewhere you would want to live. But if you go just a bit further down the street to North Rucker Ave., you will find nice, big Victorian houses that are just off the water. I guess that means investors just really have to do their homework in cities like that.

One of the comments mentioned zoning, I would certainly spend some time investigating the zoning laws and your abilities within them for any area’s that you would like to buy an investment property.

Here is a question for you, is it better to buy a large house to make a SFR rental, or would it be better to investigate the zoning on that same house and see if its already good for a 2-4 unit property, or what cost and effort it would take to get an approval or variance for the 2-4 unit?

If your able to do that, and you find a large house with a basement, or an attic, or both…then your in business…now you have 2 or 3 or 4 units with limits conversion costs…additional rents should put you in a better position to cash flow than just a standard SFR.

For that matter, what is the typical 2-4 family unit going for vs. the rents that can be had, there is another consideration?

Oh and if you expand your horizons just a bit more you can easily find those 50K listings your looking for. I grew up in Longview, WA and they are still there today, yet rents have climbed nicely. How about Lewis county? Parts of it floods and so prices are cheap in those areas, but flood insurance can cover that and rents are decent. Be creative…thats always been my motto, look and ye shall find!!!

Thanks for the comment, Rastusracing. You bring up some great points. Zoning is definitely something that needs to be looked into, and I agree that multi-unit properties (or SFRs that have a rentable basement, etc.) possess greater potential than a standard SFR.

I’ve been to Longview many times. And although I’m in the Seattle area now, I grew up in Port Angeles (the Olympic Peninsula) where home prices are much cheaper. I would prefer to have rentals that are closer to me than those areas, but you’re right when you say there are some good areas in WA to be a landlord.

Thanks again for commenting.