need some advice for arras for real estate investing (beginner)

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need some advice for arras for real estate investing (beginner)

Paras Newbe
New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes

Hello - I live in Issaquah, WA state. I want to invest for cash flow in current market. I tried Austin, Kyle, Buda but most of them turned out to be negative cash flow If I do 25% down and also account for property management fees. I am looking for buy, and rent strategy (don't want to do rehab and all for my first try)

My goal is to have 3 investment by the end of June 2023 and I want each to clash flow (unsure about cash on cash return target for now). I plan to invest ~90K for each.

1. Anyone has suggestion where can I invest around locally (so I can do self management) for cash flow?  Is Tacoma a good area? Any suggestion? 

2. For out of WA state, where can I go? 

3. Any suggestion around single family vs Multiplex (duplex / triplex)

4. Will be great if someone can suggest property management company along with potential area of where to invest.

Will be great if someone can mentor me here.

Thank you. 

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Michael HaasBusiness Member
Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
3y

@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.

[email protected]408-439-7873
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  • Olivia Radziszewski
    Realtor · Chicago, IL · Member since 2019 · 274 posts · 191 votes
    3y

    @Paras Newbe- It sounds like you could use the help of a good investor friendly realtor in your area! You can find one through this site by clicking the Network tab and then under Venders the Real Estate Agents button. 

    I am not familiar with your market. There are markets in my area that would definitely cash flow for that amount! If you have any questions about Chicago and surrounding areas, I am happy to help!

    In terms of single family vs. multi units I typically lean on the side of multi units. However, they can sometimes be sparse, dependent on the area you are looking in. Good luck!

    0Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Paras Newbe:

    I agree with Olivia. Find a local meetup to start networking with other investors. It's easier to get strong references from people you know and trust that operate in the same market.

    The DIY Landlord Book4.7248 Reviews
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    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    3y

    @Paras Newbe

    We think the Midwest is a GREAT place for OOS investors to consider!

    YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods:

    https://www.biggerpockets.com/...

    (BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)

    Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

    Many OOS investors set themselves up for failure because they don't truly take the time to understand:

    1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

    2) The Class of the PROPERTY they are buying - which is relative to the overall area.

    3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

    4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

    5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

    6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

    7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

    8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

    9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

    10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

    11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
    ***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

    https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

    Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

    Good luck with whatever you decide😊

    Please send us any feedback via email, as we do not use the DM feature here.

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  • Anthony Angotti
    Real Estate Agent · Pittsburgh, PA · Member since 2015 · 1k+ posts · 846 votes
    3y
    Quote from @Paras Newbe:

    Hello - I live in Issaquah, WA state. I want to invest for cash flow in current market. I tried Austin, Kyle, Buda but most of them turned out to be negative cash flow If I do 25% down and also account for property management fees. I am looking for buy, and rent strategy (don't want to do rehab and all for my first try)

    My goal is to have 3 investment by the end of June 2023 and I want each to clash flow (unsure about cash on cash return target for now). I plan to invest ~90K for each.

    1. Anyone has suggestion where can I invest around locally (so I can do self management) for cash flow?  Is Tacoma a good area? Any suggestion? 

    2. For out of WA state, where can I go? 

    3. Any suggestion around single family vs Multiplex (duplex / triplex)

    4. Will be great if someone can suggest property management company along with potential area of where to invest.

    Will be great if someone can mentor me here.

    Thank you. 


     I invest and live in Pittsburgh, PA and it’s been great for me. I started buying single family homes and duplexes and now mostly small apartment buildings and commercial properties. Up to 170 units in various neighborhoods and I can say that while it has been harder to find a deal the market is starting to top off a bit. Rents have gone up a good bit as well to offset the rise in prices. You just have to have some forward thinking to make deals work because most of the time when people sell their properties they are way below market rent. 

    Would be happy to talk more about Pittsburgh if you have any specific questions or want to consider it. In addition to what I own I’ve worked with a lot of out of state investors as an agent and property manager so I can speak to their experience a bit as well. 

    1Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    3y

    @Paras Newbe

    I am not familiar with your area, so you should look for an investor friendly agent yourself on BP around you! 

    If you are at all interested looking OOS, I would suggest Cincinnati. Lower price points, landlord friendly, potential cash flow, etc. Let me know if you are interested and have any questions!

    [email protected]859-443-4952
    Sam McCormack Realtor
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  • Pete M.
    Financial Advisor · Issaquah, WA · Member since 2017 · 241 posts · 141 votes
    3y

    @Paras Newbe Fellow Issaquah resident here.  You'll struggle to find "cash flow" (I put it in quotes because that also depends on how you calculate it) in this area without getting creative on financing, strategy, or finding the seller yourself.  Price-to-rent ratios here for standard long-term just don't often make sense, especially if you're looking for a turnkey property.

    There are some local meetups you can check out to start exploring options.  DM me and I can point you to a few.

    0Reply
  • Paras Newbe
    OP
    New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes
    3y

    Thank you for the response. I sent DM to some of you who responded to understand the market in your Area.

    I am talking to someone in Austin area. She is saying she knows a builder who is ready to sell for discounted price and can potentially buy down some points to lower the interest rates.

    Do you think buying in Austin could be a wrong decision long term. I will know the cash flow numbers after i talk to the builder / have property details. 

    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    3y

    @Paras Newbe stay in your own backyard. I don't know your specific location well but I'm sure within an hour you can find deals.

    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
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    0Reply
  • Sherief Elbassuoni
    Realtor · Bellevue, WA · Member since 2019 · 882 posts · 1k+ votes
    3y

    @Paras Newbe, You can get cash flowing properties locally, but with creative ways (Rent by the room, airbnb, split level homes, ADU, DADU,.....).

    Inventory of single family is a more than small multi-family, and competition is typically less

    4Reply
  • Michael HaasBusiness Member
    Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
    3y

    @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.

    [email protected]408-439-7873
    HouseHack Seattle | Michael Haas & Team572 Reviews
    WebsiteView Page
    7Reply
  • Bradley Dosch
    Real Estate Agent · Seattle, WA · Member since 2019 · 301 posts · 188 votes
    3y

    Hey Paras, great post. I would echo what @Michael Haas said. In your situation, it sounds like a DADU development would be a great play. Although I'd first start out by seeing if you can rent out any space in your place in Issaquah. It's a very desirable place to live and that's a super easy way to increase your personal cash flow! I know it's not very sexy, but it works

    1Reply
  • Paras Newbe
    OP
    New to Real Estate · Sammamish, WA · Member since 2020 · 15 posts · 7 votes
    3y

    Thank you @Bradley Dosch & @Michael Haas

    Did not know too much about DADU. Just so that I understand right, in Seattle it is ok to build a smaller home in your back yard? Is that so? I live in Sammamish / Issaquah. Doesn't HOA rule apply for building small house in back yard? How difficult is the city permit?

    0Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    3y

    @Paras Newbe- thanks   1) if you arent already  pre approved for a  loan to purchase a rental -  get this  in place  asap so you are aware of the   current numbers and  also so you can make sure you have financing lined up   2)  tacoma is  OK  but can  still be pricey  to make the  cash flow  work out  ...you are likely going to need to  look in the outskirts  more 3) if you go out of state - it helps to  look somewhere you have  a bit of familiarity with 3)  self  management  is  a good  way to  learn the ropes   4) let me know if you have any loan needs or  questions  

    0Reply
  • Michael HaasBusiness Member
    Real Estate Agent · Redmond, 🌧️ Seattle Investor-Agent | 🤑 Helped 400+ Clients Invest in Real Estate | 🏘️ Owns 23 WA Rentals & Airbnbs | 🏗️ Built 5 DADU's | 📈 You Can Do It Too · Member since 2016 · 724 posts · 3k+ votes
    3y

    @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.

    [email protected]408-439-7873
    HouseHack Seattle | Michael Haas & Team572 Reviews
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    6Reply
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