What worked for you in Seattle

7 Replies | Seattle, Washington

Hello, I'm looking at Seattle hot market right now and nothing really seem to fit the 2% / 50% rule right now.

I have 2 questions:

1. is everyone just playing the appreciation game?
2. does the 2% / 50% still make sense in an expensive area?

Hey Sam

Yeah the 2% rule went out at least 2 years ago or more. Seattle is to hot for a 1% rule. You have to think outside the box to get anywhere close to those rules these days. Maybe you have a house with a basement that can be converted to a 2nd unit, maybe add an ADU? Maybe you look for a house that can be converted or used as an adult family home (6-7 beds with 6-7 bathrooms). Those are some ways you can get close to those rules these days?

The other option is to push out to more rural areas to get closer to the 1% rule.

I hope this helps?

thanks for the fast reply!  I'm just starting out on my real estate journey so any tips and info is super appreciated.

Can you elaborate more on the adult family home investment / returns?  This is a creative strategy I haven't came across yet and can't find any numbers during my short search.

 Thanks in advance

@Sam Chan , most of the properties that are already fixed up will not cash flow. 

In many cases you will need to finish a basement, have an ADU, add rooms to make numbers make sense

I used to own a few adult family homes back in the day (25 years ago). My then wife ran the adult family homes and I ran my Mortgage Brokerage. These can be leased out in the Longview area for $5000-$8000 a month. In Seattle, it would fetch much more than the Longview area. Friends of mine, own those adult family homes that we sold them 25 years ago. I do their loans for them. They make a very decent living off of just 2 that they have. 

I would communicate with the existing adult family home owners once you have one that you are rehabbing. They may be interested in expanding. If they don't, their competition may take the home? Get up to speed with the states requirements for the way a home needs to be laid out. If you do this, you will have a very profitable home and business model. 

I hope this helps?

Originally posted by @Sam Chan :

Hello, I'm looking at Seattle hot market right now and nothing really seem to fit the 2% / 50% rule right now.

I have 2 questions:

1. is everyone just playing the appreciation game?
2. does the 2% / 50% still make sense in an expensive area?

The 2% rule has not existed in seattle as far back as I've seen in the last 10 years even with pricing from 2008-2012. However it doesnt mean they didnt exist at all because creative people who've added units, ADU's - accessory dwelling units, and or redeveloped property were able to push rents dramatically from where they were back in 2008 till present 2021.

As of right now if you were to go on the MLS to look around Id bet its around .4% to .5% of asking price atleast in areas we're buying in.

From the lender aspect, I see these figures every day from all parts of WA state, from rural towns like battleground, to sequim, to port angeles, to seattle, tacoma, and vancouver, WA. The 2nd and tertiary markets can get closer to 1% like lake moses, but you're also taking on more risk so just consider it carefully.