First home in Seattle

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First home in Seattle

Aaron Wong
Investor · Member since 2019 · 6 posts · 4 votes

Hi all! 

I am a New Yorker moving out to the Seattle area and am looking to buy my first home. I have been looking at houses in the UDistrict, Ravenna area and wanted to get some feedback on my findings. I have been primarily looking at houses with 3+ beds and 2+ baths. My plan was to live in one of the bedrooms and rent out the other two.

My criteria:

  • 3 or more beds
  • 2 or more baths
  • Up to $750k

I would be using a 30 year conventional mortgage with 20% or more down. 

Assuming I could get $1k rent per room which I think might be really optimistic, I'd have to put upwards of 40% down to make this purchase cheaper than renting (assuming $1k a month rent that covers utilities, which I was able to find while I was in Seattle a few months ago). This does not even take into consideration any maintenance that I would have to do and still leaves me with negative cash flow. 

If I were to go the renting route, I'd pay ~$1k a month with all my utilities covered and I would have the $300k I would use as down payment to put into an ETF or something. With this information, my question is, does house hacking still make sense for me? Ideally I would like to put down less but that does not seem to be an option in these neighborhoods. I am pretty set on the neighborhoods due to the proximity to the university and the light rail station to downtown.

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Jess Haas
Realtor · Seattle, WA · Member since 2019 · 117 posts · 165 votes
6y

It depends what your goals are. Are you looking to invest in more real estate after this first house? 
My advice. Rent for a year in a very central location(Capitol Hill, Downtown, Lower Queen Anne). Explore the neighborhoods and see what area you like and figure out your mode of getting around. As Michael we bought our first house in Ravenna not really knowing much about the Seattle area. It was fine the overall market appreciated, but a better return on our investment would have been found in neighborhoods south of downtown. 
To answer your original question, buying a house over renting is always better because you are building equity. Unless you plan to sell the house in less than 2 years. With realtor fees and moving costs at that point it’s better to rent. 

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  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    6y

    10/7/2019

    Aaron – thanks for the post….the price range and location sound realistic …good to se that you down payment is ample to avoid the mortgage insurance need and to keep the loan in conforming range ….I would think you could get a bit more than 1K per room depending on the location/ type of property / room size etc … even if the purchase pencils out slightly worse than the renting scenario , its worse considering as a step towards getting a property under your belt …ideas 1) buying a 2 or 3 plex at a higher price point but this would allow higher rental income 2) buy the property as a total investment property and rent for a larger amount per month …your down payment would allow this wo work ..thanks

    0Reply
  • Jake Alger
    Real Estate Broker · Bellevue, WA · Member since 2017 · 172 posts · 107 votes
    6y

    Hi @Aaron Wong,

    Renting rooms in the areas you've mentioned would be fairly simple, especially with the proximity being so close to UW.  As far as pricing, it would depend on a number of factors (size, location, privacy, condition, etc).  There'd be no scarcity of potential renters with all of the students, young professionals, and close commutability to down town.

    House hacking has a different meaning and goal for everyone.  It's usually used as a strategy for further advancement in the area of real estate investing.  It isn't necessarily about positive cash-flow right away but more-so a way to build equity and keep living costs down, allowing either a better quality of life, or as a means to save money quicker for the next investment or goal.

    While a single-family house-hack in our area won't likely cash-flow, there's something to be said about the appreciation over the time you expect to hold the property, and for what use.  Is this investment being used as a stepping stone? Is it a way of keeping your cost of living down?  What's the overall goal you're looking to achieve?

    1Reply
  • Aaron Wong
    OP
    Investor · Member since 2019 · 6 posts · 4 votes
    6y

    @Jake Alger

    Thanks for the reply. My goal is definitely to keep cost of living down. I would even like to more ambitiously have a few rental properties but I feel like not only am I increasing my spending every month by buying due to utilities/maintenance etc, I am losing out on potential returns from other sources that my down payment could have generated. I am not sure if I am thinking about this the wrong way or not...

    @Dave Skow

    Thanks for the ideas. I will definitely take a look to see if there are any 2 or 3 plex properties. 

    1Reply
  • Jason Lee
    Member since 2019 · 1 post · 0 votes
    6y

    Hi Aaron (and all),

    Your criteria is matches mine exactly except I am looking at a different location!  And I am working through the same dilemma as I think my out of pocket expenses will be higher if I go with buying vs. renting but part of that monthly expenses is going into the principal of the house.  Also, maybe the quality of life in a home would be better compared to renting?   From my very novice research, we may need to rely on appreciation more than cash flow in the Seattle area.  There is the opportunity cost that you sacrifice when you use your cash savings to purchase real estate vs. other investments but I'm sure that will be factored into your decision.

    I'm curious as to whether you are working with an agent right now. I am just beginning my search and I think a knowledgeable agent, with experience in looking for SFH with rental potential, would be hugely beneficial. How did you start that search?

    Thanks!

    0Reply
  • Megan Shay
    Real Estate Broker · Poulsbo, WA · Member since 2018 · 121 posts · 66 votes
    6y

    @Aaron Wong, where will you be working? If you're downtown, you may also want to consider Kitsap County. Easy commute to downtown Seattle and WAY more affordable. Healthy Navy population with the bases at Bremerton and Bangor (not so different from UW in terms of a healthy rental market), but also lots of healthcare employees. Probably more responsible than students. ;-) I say that as a UW grad who lived in the U-District for several years post-college as well. 

    Good luck, and PM me if you have Kitsap questions! I moved to Poulsbo last year from Mercer Island and we love it here. 

    0Reply
  • Aaron Wong
    OP
    Investor · Member since 2019 · 6 posts · 4 votes
    6y
    Originally posted by @Jason Lee:

    Hi Aaron (and all),

    Your criteria is matches mine exactly except I am looking at a different location!  And I am working through the same dilemma as I think my out of pocket expenses will be higher if I go with buying vs. renting but part of that monthly expenses is going into the principal of the house.  Also, maybe the quality of life in a home would be better compared to renting?   From my very novice research, we may need to rely on appreciation more than cash flow in the Seattle area.  There is the opportunity cost that you sacrifice when you use your cash savings to purchase real estate vs. other investments but I'm sure that will be factored into your decision.

    I'm curious as to whether you are working with an agent right now. I am just beginning my search and I think a knowledgeable agent, with experience in looking for SFH with rental potential, would be hugely beneficial. How did you start that search?

    Thanks!

    Hi Jason,

    I do not have a realtor I am working with at the moment just yet. I have relied heavily on Zillow and my experiences living in Seattle this past summer. 

    0Reply
  • Aaron Wong
    OP
    Investor · Member since 2019 · 6 posts · 4 votes
    6y
    Originally posted by @Megan Shay:

    @Aaron Wong, where will you be working? If you're downtown, you may also want to consider Kitsap County. Easy commute to downtown Seattle and WAY more affordable. Healthy Navy population with the bases at Bremerton and Bangor (not so different from UW in terms of a healthy rental market), but also lots of healthcare employees. Probably more responsible than students. ;-) I say that as a UW grad who lived in the U-District for several years post-college as well. 

    Good luck, and PM me if you have Kitsap questions! I moved to Poulsbo last year from Mercer Island and we love it here. 

    Hi Megan,

    I will be working in downtown. I am unfamiliar with the Kitsap county area but a quick google map search shows at least a 1.5 hour commute one way. At least for now, that is not something I am willing to consider.

    1Reply
  • 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
    6y

    You should be getting $1100+ a room for a 3 bed in Ravenna no problem- the basement of our 8 bed houses in N Beacon Hill rents for about $800 a room, and there isn’t much updated and nice housing any cheaper than that. 

    We used to live in Ravenna, but I’m not a big fan of the neighborhood. Depends on where you work and what you’re looking for, but there are plenty of other places that are livable, walkable, safe, attractive, well maintained, AND have good rental income. Ravenna is definitely an great owner occupants neighborhood but the price points make it hard to cash flow there. 

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

    @Aaron Wong I wouldn’t steer your towards Kitsap given your situation, but there is a fast ferry (passengers, no cars) from Bremerton to downtown seattle that takes 30 minutes and a car ferry that takes 60.  You’re right that if you need to drive without the ferry it’s longer. 

    Have you looked at N. Beacon Hill? It’s closer to downtown with a 10 minute light rail ride, is right off the freeway, and more walkable, more diverse, and better cashflow than Ravenna and most of north seattle. 2 of our 5 properties are there and we LOVE the neighborhood. 

    [email protected]408-439-7873
    HouseHack Seattle | Michael Haas & Team572 Reviews
    WebsiteView Page
    4Reply
  • Aaron Wong
    OP
    Investor · Member since 2019 · 6 posts · 4 votes
    6y
    Originally posted by @Michael Haas:

    @Aaron Wong I wouldn’t steer your towards Kitsap given your situation, but there is a fast ferry (passengers, no cars) from Bremerton to downtown seattle that takes 30 minutes and a car ferry that takes 60.  You’re right that if you need to drive without the ferry it’s longer. 

    Have you looked at N. Beacon Hill? It’s closer to downtown with a 10 minute light rail ride, is right off the freeway, and more walkable, more diverse, and better cashflow than Ravenna and most of north seattle. 2 of our 5 properties are there and we LOVE the neighborhood. 

    Hi Michael,

    Thanks for the pointer! That looks like a solid neighborhood. I will definitely start keeping an eye out for properties in this area.

    1Reply
  • Megan Shay
    Real Estate Broker · Poulsbo, WA · Member since 2018 · 121 posts · 66 votes
    6y

    @Aaron Wong, @Michael Haas is correct. Fast ferries (foot only) take ~35 min from Bremerton or Kingston to downtown Seattle. I take the Bainbridge ferry when I drive over. The ferry ride itself is about 35 minutes also, then it just depends from there where  you go. Also depends if one is coming from further away (takes me 20 min to drive to the BI ferry), vs if I lived closer. Either way, I like the ferry commute much better than sitting in traffic on I-5 for the same amount of time. ;-) 

    0Reply
  • Monica S.
    Rental Property Investor · Bremerton, WA · Member since 2017 · 12 posts · 9 votes
    6y

    Hi Aaron,

    Your numbers sound spot on and with the Roosevelt Light Rail Station opening in 2021, house values around it could likely go up. I used to work in Ravenna for many years, love that neighborhood. 

    @Megan Shay has good points about Kitsap, your money would definitely go a lot further if you don't mind a ferry commute. The views from the ferries are stunning, it's my favorite way to travel. It does have its downsides at times (mostly scheduling). I live in Bremerton currently and my other half regularly takes the fast ferry (and so do all of our neighbors) and it's only 30 minutes to Seattle. The housing stock in Bremerton is older and many houses are in need of some repair, but a lot of them are also charming (wood floors, leaded glass windows etc). You can get a place for around 1/2 to even 1/3 the price of Seattle housing. We bought a SFH with a separate detached cottage and rented the cottage out to someone in healthcare. We've really appreciated being able to house hack in this way while also having privacy. I've seen quite a few of these types of houses on the market over the last year too, just something to consider.

    Good luck in your search! 

    3Reply
  • Jess Haas
    Realtor · Seattle, WA · Member since 2019 · 117 posts · 165 votes
    6y

    It depends what your goals are. Are you looking to invest in more real estate after this first house? 
    My advice. Rent for a year in a very central location(Capitol Hill, Downtown, Lower Queen Anne). Explore the neighborhoods and see what area you like and figure out your mode of getting around. As Michael we bought our first house in Ravenna not really knowing much about the Seattle area. It was fine the overall market appreciated, but a better return on our investment would have been found in neighborhoods south of downtown. 
    To answer your original question, buying a house over renting is always better because you are building equity. Unless you plan to sell the house in less than 2 years. With realtor fees and moving costs at that point it’s better to rent. 

    4Reply
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