New Investor, buy and hold in Seattle

San Francisco, CA · Member since 2015 · 786 posts · 717 votes

11y

Originally posted by @Allen Clark:

In the past seven months I have bought my first two investment properties in the City of Seattle and have brought them online.

Property #1 is an 8 year old 2BR 1.5 bath 1,100 sq ft half duplex bought for $350k and renting for $2,750. No money needed for repairs to get it rented. 20 min walk from downtown.

Property #2 is a 1922 brick house that I am converting into a legal duplex. Bought for $550k and will put $200k in. Upstairs is done and now is 3BR 1 bath 1,500 sq feet renting for $3,500. Basement is next and will be 650 sq ft 1BR 1 bath and will rent for $1,800.

Both are cash flow positive and I think I am doing ok. I am 46 and solid in the business world but new to investing in real estate. I will keep my day job as I am good at it and certainly want to keep my regular income as I explore this new hobby.

I work in tech (there are lots of us in Seattle) and my friends/colleagues/acquaintances have noticed my new hobby. People are asking what I think of new deals but, believe me, I am very green and I know it. However, the locations of the two properties I own are fantastic. Keeping within a 20 minute walk to downtown Seattle is a great niche for me and there are so many old houses that could use some love.

I am now considering doing a few more of these but am out of my own personal money. I am not willing to get over leveraged as I know real estate can go up and down. I have people asking me if I would be interested in taking on investors. To find a few new projects to work on. I am looking for tips as I consider this. Can you point me to the best books / sites on building a real estate portfolio that you manage for other people? I know how green I am but I am smart, driven, and hard working. Maybe in a few years I would be willing to do this more on a full time basis. Maybe post 55 it could be a good retirement gig. For now, I would like to read and consider. Although I just saw three properties today online that fit my criteria. Within a 20 minute walk to downtown and immediately cash flow positive.

Any thoughts for a newbie?

Congratulations on taking action. That really is where 95% of the wanna-be investors get off the bus. What are you looking to do? Rentals? Flips? Wholesales? Great book for flips is the one written by Jay Scott through Bigger Pockets and also the book "Flip". For holds, I would recommend locally (here in Seattle) signing up for stilltraining.com to learn how to calculate Cash-on-Cash return properly with Pre-Tax Cash Flow and including the Annual Debt Service and also properly calculating the Time Value of Money to come up appreciation numbers. You should be able to calculate an Internal Rate of Return on any deal and this is critical to real estate investing. Another good book is "Hold".

If you want to learn wholesaling, I'd recommend you learn from an active wholesaler such as myself (doing 15 to 20 wholesales a month for development and flips with three negotiators and thousands of mailers). You may want to start learning the flip analysis through wholesaling before starting in flips, especially if you have no construction project management background.

If you have cash investors that would JV, that can be a great way to learn if you're working with experienced people.

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Adrian Chu

Real Estate Broker · Seattle, WA · Member since 2014 · 1k+ posts · 427 votes

11y

Looks like you made some great investments.

Companies like Amazon keep hiring. Entry level engineers make $100k a year. They have that disposable income to pay for that city life and as a result prices keep going up. Historically places like Central District and Judkins were not great neighborhoods but now new townhomes keep popping up at every block and prices keep going up like every second.

Have you considered getting a real estate broker license?

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Account Closed

Las Vegas, NV · Member since 2015 · 84 posts · 8 votes

11y

$750k in and $5,300 in rent and you cash flow. You should be writing books or doing seminars.

You pay all cash?

1 Reply

Allen Clark

OP

Investor · Seattle, WA · Member since 2015 · 100 posts · 59 votes

11y

Thanks for the replies.

I like doing rentals, it seems. Buy and hold. I am patient and my time horizon is long. I figure if I hold these for 15-20 years they will pay off well. Their location is so good and I think urban living in Seattle will just get more compelling.

I did not pay all cash. 30% down and paid cash for the $200k in renovations. I am through all the finances that I comfortably want to use. I am not interested in dipping into my 401(k) or the money I have set aside for kids college savings.

I have not considered get a broker's licenses. I am not that interested in making money that way. Are you suggesting to do that in order to learn more about how the transactions take place?

I do not know what wholesaling is. Like I said, I am new to this. For these two properties I just watched Redfin like a hawk. I had strict criteria (> 85 walkscore, < 25 min walk to downtown, cash flow positive with a 15 year mortgage after 25% down). When I saw one I went after it. The house in Lower Queen Anne has a view easement against it that I did not notice (rookie mistake) which meant that I cannot go up at all. I am sure that made the property unappealing to some investors. I renovated keeping the current footprint and it worked out well for me.

I think right now I have been smart and lucky. Rents are exploding in Seattle, especially for places close to downtown. The 20 somethings working at Amazon et al do not own cars and want to live in cool neighborhoods. I thought I would get $2,800 for the upstairs of my brick house but ended up getting $3,500. For the duplex I get $2,750 but I know I can get $3,200 when these tenants leave.

So the question remains, where do I go from here. I have tapped out the finances (I have cash reserves of course) that I am willing to spend. Do I sit tight for a few years? I do see other properties that fit my criteria and would do well. Do I think about looking for investors?

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Alex Chin

Seattle, WA · Member since 2015 · 500 posts · 243 votes

11y

Welcome to the wonderful world of real estate investing @Allen Clark. Great to hear you're jumping right into this, sounds like you are building from a position of strength with a good eye towards the long-term.

Curious how you did the renovations, do you have contacts among contractors that you used or did you just put out a general RFP and pick one that you felt was reputable?

If you like investing in neighborhoods like downtown Seattle, you may want to also take a look around Columbia City. It's only 15 minutes via Light Rail from downtown, and has a great neighborhood vibe to it with skyrocketing rental rates, definitely a hot area.

As for what to do from here now that your personal funds are tapped out, one strategy I have heard used is to put together case studies of your two properties, and then present them to colleagues, friends, family and let them know what you are doing, what your returns are, and see if there is any interest in leveraging your experience to do a joint venture with someone.

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Allen Clark

OP

Investor · Seattle, WA · Member since 2015 · 100 posts · 59 votes

11y

@Alex Chin, I asked friends and colleagues for contractors that they have used in the past. I ended up with a young, hardworking, contractor that was willing to do the work at a lower rate in order to build up his referral base. His quote came in lower and we worked well together. I am very happy with his quality of work, his ability to deliver on time, and his ability to manage sub contractors.

A case study is a good idea. I will have to think about what I want to do. There are a number of friends that seem to want to get into this but I doubt that they actually want to take on the risk or the work to get the job done. Let alone managing tenants.

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Steve Vaughan

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

11y

@Allen Clark I would just add that it's ok to grow slowly. The R/V ratio there in Seattle is very different than what I deal with here on the east side, but if it's working for you, that's awesome! When I run out of capital/want to build capital to deploy to a new investment, I don't seek buy and holds. I don't stop marketing for all property types that make sense, but I tend to seek l/o's and properties to wholesale off more. I am completely upfront with the seller always.

Sounds like you are doing great and nothing is on fire here. First 2 properties in 7 months is a lot. Grow slowly!

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Mark Nolan

Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes

11y

@Allen Clark

Welcome to Bigger Pockets. BP is full of resources. You will find resources here from blogs to pod casts and forums. You can also send messages to members. This is one of my favorite features of Bigger Pockets especially for asking specific questions.

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Julie Macd

Investor · Seattle, WA · Member since 2015 · 71 posts · 60 votes

11y

@Allen Clark

Congratulations on your first 2 properties, I hope your success continues.

You are making some great cash flow on your properties. Have you considered refinancing or getting a HELOC on the duplex to give you some cash for your next deal. I understand about not wanting to be over-leveraged, but perhaps you can find a balance.

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Allen Clark

OP

Investor · Seattle, WA · Member since 2015 · 100 posts · 59 votes

11y

@Julie Macd - The owner of the other half of the duplex that I bought tells me he wants to sell in the summer of 2016. I bought for $350k in December and a unit very similar to mine just went for over $400k. Since I put 30% down there is equity to take out. I have thought about it but it does feel like going in the wrong direction. I need to think through when I would add debt vs using cash and savings.

@Steve Vaughan - Yes, I will go slowly. I have been lucky so far and my rookie mistakes have been recoverable. I have ample cash reserves to cushion any (most?) surprises.

Going forward I will keep these two rentals online and add the basement of the 1922 brick house. Once I get all three producing income then I will think about what to do next. Perhaps work up to buying the other half of the duplex?

Thanks for the warm welcome. Things are good in Seattle which leads me to wonder how exactly is the best way to prepare for the inevitable downturn...

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Arthur Schulte

Designer & Educator · Redmond, WA · Member since 2015 · 12 posts · 6 votes

10y

@Adrian Chu

Hi Adrian,

I'm actually interested in getting my broker's license. Would love to hear your recommendations/insight regarding the route I should take? Do you suggest I take online courses or are there reputable programs at local schools in the Seattle/Bellevue/Kirkland/Redmond areas that I should look into?

Cheers

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New Investor, buy and hold in Seattle

New Investor, buy and hold in Seattle

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