Is 10 % Cash-on-Cash return a pipe dream in Greater Seattle?

Question

Hey BP Humans! I am a new investor in the Greater Seattle region and have been doing some market research. I'm looking to buy properties that give at-least a 10% Cash-on-Cash return with 25% down on a conventional loan. I've been looking for a couple of months on MLS and have not found a single one that meets that criteria (single/multi family or condo). Is a 10% CoC return a pipe dream in Seattle/greater Seattle or am I doing something wrong? Any guidance would be super helpful. Thanks!

James Dainard · Answer

Hey Suyash,

It's not impossible but you have to be creative like others in the thread are saying. Typically your scope of work will have to be something that other investors aren't willing to take on.

Have you considered hard money at all? The leverage would increase your return on the right project.

Michael Haas · Answer

We're still finding 10%+ CoC deals in Seattle, Everett, and Tacoma but they definitely require creativity and persistence to source. Deals are made, not found in the Seattle/Tacoma/Everett market. Rehabs, off market, seller financing, utilizing creative strategies like rent by room, building out ADU's and DADU's, condo-izing lots, & using Airbnb or Mid Term/ Corporates rentals is where we're find 10%+ CoC locally.

Happy to send you some specific properties as examples @Suyash Singh - shoot me a message directly!

Michael Haas · Answer

As other posters have mentioned - a standard long term rental strategy in Seattle / Everett / Tacoma should yeild 0% - 5% CoC, maybe a little more, but rarely 10%.

Sherief Elbassuoni · Answer

@Suyash Singh, if you are renting the whole house to one family, most probably you will not get anything near 10% COC. You will need to use other strategies like split level home, rent by room, ADU, Airbnb, ..... to see high returns

Julien J. · Answer

I agree with the above, it's been a long term equity play for a while now. I picked a few properties in Mill Creek, Bothell, and Everett which started with 6-8% COC. Overtime with rent raises, rehabs and leveraging the equity, they have been a great investment edging towards 20% YOY returns. Day 1 cash flow w/ 10% returns isn't the play here.

If you have looking for a pure cashflow play, I'd recommend looking into private lending with a boutique firm.

Nathan Gesner · Answer

That would be a unicorn in this market. Sales prices are through the roof, which makes it difficult to create a strong cash flow. You'll need to wait for the market to catch up or you'll have to find off-market properties.

Ping Ji · Answer

Not easy but totally possible. Just bought one in 2021 with over 15% CoC but needed to be a bit more creative.

Sergey A. Petrov · Answer

Mostly true for Everett and Tacoma. Need to go further out if you are looking for better CoC or immediate cash flow. There are still “pockets” in / around Seattle and other urban centers but you are mostly looking at sub-C class. Deals do come up here and there just need to watch and be ready to move. And the market is softening so I suspect we’ll see a bit more of negotiating on transactions but I wouldn’t keep your hopes up for 10%

Sergey A. Petrov · Answer

Not happening in Seattle…10% CoC aside, go way out and you might have cash flow but Seattle proper has been appreciation play for some time now. Cash flowing deals off MLS are tough to find especially if you are looking for something that doesn’t require a rehab

Is 10 % Cash-on-Cash return a pipe dream in Greater Seattle?

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