Starting out investing in SFH on the Eastside (of Seattle)

[Charlene Atlas]

Hi Everyone, my name is Charlene, happy to be joining this community! My husband and I are looking to buy our first rental property. We have a big renovation coming up at our primary residence and we are trying to align getting our first rental with the reno, so that we can stay there for a few months during the construction, and then rent it out. 

I have been learning from the BiggerPockets podcasts/website and I am almost done with "The Book on Rental Property Investing". We have also already gotten a HELOC setup and ready and we are working with a lender now to get prepared with a preapproval letter.

However, I am having a lot of trouble finding deals in the area we want to be in. With the restriction of us needing to live there for a bit and needing to stay near work (Redmond) and school (Kirkland), it is hard to find anything that will cash flow. We are looking in the Redmond and Kirkland areas.

Is there any chance for us to find a positive cash flow investment in these areas for a SFH? We are working with a realtor to send us possible homes, but all my 50% rule and 2% test checks are coming back not great. Any tips? Thanks!

[Adrian Chu]

Eastside does not work. Purchase price is high and rents are actually low. Renters don't "love" renting in the Eastside and thus they don't pay a premium to live there. Areas like Seattle or up north like Everett and surrounding cities or South King / Pierce county works better.  You will see that a $1 million house in the Eastside rents for the same as a $500,000-600,000 one in Seattle and maybe an even lower priced one further out.  

If you are looking for a short term place to stay during renovation, there are builders waiting for permits on homes and those could be good win-win opportunities because a lot of those homes are livable. 

[Charlene Atlas]

Wow, thank you, @Adrian Chu! Glad I asked! That's unfortunate there aren't deals around here, perhaps in a different market in the future.

For the short term stay, you mentioned "there are builders waiting for permits on homes" and there a lot available. Does this mean that they are renting out these homes? How would I find listings for these? Thanks!

[Michael Haas]

@Charlene Atlas yes, the Eastside is a appreciation play, not cashflow - as Adrian mentioned the rents are comically low for the market value of the properties there. I live in North Beacon Hill - have you thought about Judkins Park, Beacon Hill, and the other neighborhoods just across the i-90 bridge from the Eastside? Rent to price ratios are better there, and I can get to our office in Bellevue in less than 20 minutes.

A piece of advice - it sounds like you'll be living in this rental property for about 6 months, and (ideally) you'll be holding it as a rental for 30+ years after that. I'd prioritize the rental, not your personal housing, and either commute for 6 months or just rent an Airbnb in on the Eastside and buy your rental where it makes sense. Any money saved by not having to pay for a place for your family to stay is going to be overshadowed by the Eastside not having the cashflow you're looking for.

That said, there are some strategies that work on the Eastside. Kirkland is a great example - they allow development of TWO detached DADU's, and also allow you to condominiumize the lot to sell the house, DADU 1, and DADU 2 all separately. Cashflow is still weaker, but you can bag $500,000 or more of equity building out a Kirkland lot with that strategy. 

Happy to talk more - feel free to shoot me a DM. Cheers!

[Sherief Elbassuoni]

@Charlene Atlas, as mentioned above, east Seattle (Belelvue, Kirkland, Redmond, ....) are primarily for appreciation more than cash flow. With some creative methods like rent by room or so, you may break even or slightly above/below that, but it will not be great cash-flowing property. 

[Dave Skow]

@Charlene Atlas- you will liekly not find any SFH options in the BKR ( bellevue kirkland redmond) are that will cash flow to meet your tests ....you will either likely need to disregard your criteria or begin looking in other areas that might cash flow better ( renton ...kent ....Everett ...Bothell ...etc...)

[Vishnupriya Suresh]

@Michael Haas, Redmond, Bellevue, Sammamish, Bothell also allows to condominiumize the lot. How is Kirkland different?

[Ran Iarovich]

Quote from @Charlene Atlas:

Hi Everyone, my name is Charlene, happy to be joining this community! My husband and I are looking to buy our first rental property. We have a big renovation coming up at our primary residence and we are trying to align getting our first rental with the reno, so that we can stay there for a few months during the construction, and then rent it out. 

I have been learning from the BiggerPockets podcasts/website and I am almost done with "The Book on Rental Property Investing". We have also already gotten a HELOC setup and ready and we are working with a lender now to get prepared with a preapproval letter.

However, I am having a lot of trouble finding deals in the area we want to be in. With the restriction of us needing to live there for a bit and needing to stay near work (Redmond) and school (Kirkland), it is hard to find anything that will cash flow. We are looking in the Redmond and Kirkland areas.

Is there any chance for us to find a positive cash flow investment in these areas for a SFH? We are working with a realtor to send us possible homes, but all my 50% rule and 2% test checks are coming back not great. Any tips? Thanks!

If you want to find cash flow and appreciation simultaneously, I would try to see if you can invest in the outskirts of the Eastside. I found a lot of potential in Kent, Renton, and Bothell. Redmond is more affordable than Kirkland, but they still lead to less than 5% cap rates on average. But, as with anything there are always outliers. Try to explain to your agent exactly what you want from them so that they can look for you in unconventional ways such as off-markets, fsbos, cancelled/expired listings.

Questions such as: 

- What is your goal with this property and what investment strategy will you use? 

- Remodel/repair costs?

- long term plan?

All need to be evaluated at least 3 layers deep each. 

Hope this helps!

Mazal,

Ran

[Michael Haas]

@Vishnupriya Suresh:

Maybe there's a confusion of terms here - Redmond, Bellevue, Sammamish, Bothell have condo's but because they do not allow ADU's and DADU's to be non-owner occupied the condoiztion strategy we're talking about doesn't apply there. I'm 99% sure of this but as always the city and zoning code is the place to look to be sure.

[Julien Jeannot]

I agree with the above posts. The Eastside does not meet these rules.

I'm also a big fan of focusing on buying rental prior to improving your home, unless you are about to sell it and invest into your next house hack.