Buying a property in Eastside Tacoma

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Buying a property in Eastside Tacoma

Amanda Rivera
Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes

Hey all,  

So I'm a new investor and I am in the middle of the purchasing a property in South Tacoma (eastside). To be honest I'm pretty sure it's not the best deal but I felt like I was falling in to the analysis paralysis trap and I needed to get into a deal to give me that push I needed to get into real estate investing. The property is under contract for $405,000 it's a 4 bedroom 2 bath SFR with a separately metered mother-in-law studio (which also has it's own kitchen and bathroom). Its a really well done reno and I was planning on househacking to cover the mortgage and utilities. I looked at rental comps and from what I'v seen I can get about $900 for the studio and $2000 for the primary house to a family; $2400 if I rent out rooms (correct me if I'm wrong). My question is regard buying such an expensive property in an area and that is considered up and coming. Does anyone see that area changing enough to validate 2673 sqft house being worth $405,000, even if it does have high end finishes.

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Timothy Tooker
Real Estate Agent · Puyallup, WA · Member since 2012 · 240 posts · 95 votes
9y

@Amanda Rivera

1. Your realtor should have done a CMA to make sure you are not over paying for a property. If they can not show you that you are making a good investment, you have the wrong realtor.

https://www.redfin.com/WA/Tacoma/5813-E-I-St-98404...

http://mls.realist.com/index.jsp

https://epip.co.pierce.wa.us/CFApps/atr/ePIP/build...

2. I think you are a little high on your rent numbers for the Main house. It is only 1600 + sq ft. I have clients that rent 3/1 around $1400. Could you get more, based on the level of finish... Sure, but not many professionals are choosing to move to east Tacoma to live in those neighborhoods. 

3. For that type of money you could buy a true Multi-family in a better part of Pierce County.

Sounds like you are trying to force a purchase in a hot and crazy market. In my opinion that could lead to a very good lesson the hard way.

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  • Kimani Kironji
    Tacoma, WA · Member since 2017 · 17 posts · 1 vote
    9y
    Quick question that would make the answer different. Is this Eastside Tacoma Wa or another state .
    0Reply
  • Larry F.
    Wholesaler · Puyallup, WA · Member since 2015 · 171 posts · 82 votes
    9y

    About 148 per square foot. Need to look at comparable sales to determine if you're at right price.

    0Reply
  • Andrew Harris
    Engineer · Tacoma, WA · Member since 2015 · 17 posts · 5 votes
    9y

    Sounds expensive for that area.  Depending on the exact neighborhood, SE Tacoma in general is higher crime and lower income.  

    0Reply
  • Kimani Kironji
    Tacoma, WA · Member since 2017 · 17 posts · 1 vote
    9y
    To answer my self Tacoma is like my backyard so from my experience. North Tacoma 4Bd SFR $405000 is very much possible in today's market . That doesn't raise a red flag . South Tacoma( Eastside /Midland/Parkland) 4Bd SFR $405000. YEAP !!! Red flags start flying all over. Not to take away anything from this places .. they are small pockets in this areas with that kind of price tag and I mean they are limited places with that price tag. If it's a multi family new duplex / 4 -plex then the deal would pass the smell test ONLY...and anything I said before can be ignored. Early Feb I sold my Triplex 1940 building in South Tacoma for $250000 to new investor. Good cash flow I just had a hard time commuting to and fro for repairs showing the place . As per the real estate agent the place couldn't get Con loan or FHA or Va loan because it had separate Utility for all units. Hope this information helps
    0Reply
  • Timothy Tooker
    Real Estate Agent · Puyallup, WA · Member since 2012 · 240 posts · 95 votes
    9y

    @Amanda Rivera

    1. Your realtor should have done a CMA to make sure you are not over paying for a property. If they can not show you that you are making a good investment, you have the wrong realtor.

    https://www.redfin.com/WA/Tacoma/5813-E-I-St-98404...

    http://mls.realist.com/index.jsp

    https://epip.co.pierce.wa.us/CFApps/atr/ePIP/build...

    2. I think you are a little high on your rent numbers for the Main house. It is only 1600 + sq ft. I have clients that rent 3/1 around $1400. Could you get more, based on the level of finish... Sure, but not many professionals are choosing to move to east Tacoma to live in those neighborhoods. 

    3. For that type of money you could buy a true Multi-family in a better part of Pierce County.

    Sounds like you are trying to force a purchase in a hot and crazy market. In my opinion that could lead to a very good lesson the hard way.

    7Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Kimani Kironji

    Yes it's in Eastside Tacoma WA.

    0Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Larry F 

    I've tried to find comps but there aren't any property that look quite like it. The main part of the home is a 3 bedroom with an "office" that could be used as a 4th bedroom. And it has an attached studio. There just aren't any properties like it in South Tacoma. 

    0Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Kimani Kironji

    It's not a true duplex. But it does have an attached studio apartment that is a separate dwelling from the main property (see Timothy Grouthuesmann's post for the Redfin link). 

    The price tag worries me as well  I honestly haven't seen anything in South Tacoma as of yet that sold for that amount! Hence my concern. 

    0Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Timothy Grothuesmann

    Thanks so much for the advice it really did clear things up for me. My thanks is extended to everyone else who posted on this thread as well.

    0Reply
  • Lane Kawaoka
    Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
    9y
    Albert Bui has Mfh in Tacoma.
    0Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    9y

    The value is there to appraise probably depending on the part of tacoma it is in since 148 per sqft is not abnormal. The higher end of parts of tacoma are 180-220 per sqft and the lower sqft SFR ranges where homes are 700-950 sqft are getting near 300 per sqft but that is an anomaly in the lower sqft homes where an investor can exploit if there is a big spread between acquisition, rehab, and ARV at the end.

    Each area varies like with any other city, just like how higher sqft ranges start to see a decrease in price per sqft, usually 2500 sqft -4000 sqft+.

    There is a big difference between south tacoma and east side tacoma.  Im not involved with either but doesnt meant it couldnt be lucrative.

    In my opinion buying in tacoma at a .716% rent to price ratio (2000 + 900 rent  / 405,000 price = .00716) is very tight.

    1Reply
  • Rudy Manna
    Investor · Redmond, WA · Member since 2016 · 267 posts · 110 votes
    9y

    @Amanda Rivera

    Its a horrible investment.

    -Overpriced

    -Horrible cash flow.

    -Poor liquidity. Above range price and too large  for that neighborhood.

    If your agent haven't told you any of those, time to fire him/her.

    2Reply
  • Scott S.
    Tacoma, WA · Member since 2014 · 77 posts · 92 votes
    9y

    While Tacoma is a hot rental market you are buying the most expensive house in one of the worst neighborhoods.  

    Why not spend that $405k in the North end in the most desirable area of Tacoma?  You can get 3-4 bed homes between low $300k to $400k and get $2k+/mo rent with a whole lot less headaches.

    3Reply
  • Aaron NelsonBusiness Member
    Real Estate Agent · Seattle, WA · Member since 2016 · 307 posts · 191 votes
    9y

    @Amanda Rivera - Welcome to BP and the Western Washington real estate market! It is always nice to see people getting involved in the investor community! 

    I tend to agree with @Rudy Manna on this one but will throw in the caveat that it depends on your goals! 

    If your goal is to own the nicest house in the neighborhood, this will probably work. 

    If your goal is to buy an asset that will produce meaningful returns, help you jump start your real estate investing career and supplement your retirement, this is not going to cut it.  

    My wife and I own several rentals in the area and buy properties with the later goals in mind. I can confidently say that there is no way in the world we would buy this property (at that price) nor would I ever tell one of my clients to. There are other deals that better suit our needs. 

    It sounds like @Timothy Tooker has provided some sound investment advice, so you might consider talking more with him if you end up deciding this property does not align with your goals...

    [email protected]425-880-2580
    White Coat Realty536 Reviews
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    2Reply
  • Curtis BidwellPro Member
    Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
    9y

    Hi @Amanda Rivera. I started my investing in Tacoma/Puyallup where I lived for 10 years before moving south to Olympia where I currently do most of my investing.  As others have well said, the house is nice, but the area is rough. 

    You stated in your profile: "looking for a 2 to 4 unit multifamily which I can add value to either by raising rents or forced equity or both. Cash flow is my main concern."  I would suggest that this home does not meet any of those criteria.  At this price there's no value to add and rents are what the market will bear - I think your expectations are high. I don't see any place to force additional equity and your cash flow will likely break even (depending on how much you're willing to put down). 

    One other thought, a home with an ADU will limit your market when it comes time to resell. Duplex buyers will pass over it, and the general market isn't looking for an ADU. It will take just the right buyer at the right time. I try to buy the kind of house that the most people will want: easy to rent, easy to sell.

    Good luck to you!

    Podcast Guest on Show #95
    3Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Aaron Nelson

    I don't think this property does suit what I want in a rental (thank you @Curtis Bidwell for holding me accountable). 

    I'm working with a VA loan and there are pretty strict guideline on what kind of properties I can buy. Considering that restraint what would you say I should do, as far as trying to find value add deals in this hot market?

    1Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    Also, are there any regularly held events for local investors anyone would recommend attending?

    0Reply
  • Curtis BidwellPro Member
    Rental Property Investor · Olympia, WA · Member since 2014 · 777 posts · 744 votes
    9y

    @Amanda Rivera @troy fisher runs the Cascadia Investor Alliance that meets at the Ram in Lakewood the 3rd Monday of each month, 7pm (Aug 21st). There are a lot of excellent connections to be made there -mostly BP connected folks including several podcast veterans.  (I'll be getting back from Guatemala the night before so may not make the August meeting).  

    As to buying in this hot market, you have to decide what your willing to do. Many on the forums are looking for a below market "deal".  Those are hard to find and full of stiff competition.  

    However, i bought many of my properties in 2003-2005 when the market was roaring the same it is now.  I paid retail, or slightly below. Today I cash flow very nicely -and have substantial equity due to both the increased market value and principal pay down. But Everything cash flowed on day 1.

    Make sure what you buy truly cash flows based on your price and downpayment (include mortgage pmt, taxes, insurance, repairs, vacancy, capital exp reserves, and management). If your still making a couple hundred a month don't sweat the price, go for it! 

    Podcast Guest on Show #95
    3Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    I'll make sure to be there. Thank you for the information. I owe you a beer. 

    0Reply
  • Amanda Rivera
    OP
    Real Estate Broker · Tacoma, WA · Member since 2015 · 13 posts · 2 votes
    9y

    @Curtis Bidwell

    0Reply
  • Erin Caldwell
    Investor · Seattle, WA · Member since 2016 · 30 posts · 17 votes
    9y
    Mark Rivera my husband and I own a triplex we closed on May 26 in South Tacoma very close to South Tacoma Way. Initially we were nervous about the location, but the numbers worked out really well. What does your mortgage + taxes + insurance work out to? Tons of local people we talked to beforehand underestimated what we could get for rent. Some said we could only get $1500 for our 5 bedroom (we have a renter paying $1925.) we had a ton of applicants. The area is changing. As such, it's a risk. Background: Purchased for $350,000. It's 3500 square feet. There are 3 units: a 5 bedroom (yes, 5 bed), 2 bedroom, and a 1 bedroom unit. We will be living in the 2 bedroom. We have a renter in the 5 bedroom for $1925. We will soon have a renter in the 1 bed (it's not renovated and it's a friend, we will renovate soon) for $500. That means that after mortgage, taxes, and insurance we are househacking and breaking even, which I think is a success (especially because we have don't have the 1 bedroom to its full potential.) Yes, the area isn't high end. Yes, we had a lot of very unqualified applicants. However, it only took 10 days to find a very qualified applicant. We have enjoyed living in the neighborhood. I feel 10x safer here than I did in Seattle, and people are super nice. Maybe we are foolish, but the numbers work out. Go with your gut. However, don't get desperate. We refused to buy anything that the numbers didn't fully work out. Hope this helps!
    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    8y
    Originally posted by @Erin Caldwell:

    Mark Rivera my husband and I own a triplex we closed on May 26 in South Tacoma very close to South Tacoma Way. Initially we were nervous about the location, but the numbers worked out really well.

    What does your mortgage + taxes + insurance work out to? Tons of local people we talked to beforehand underestimated what we could get for rent. Some said we could only get $1500 for our 5 bedroom (we have a renter paying $1925.) we had a ton of applicants. The area is changing. As such, it's a risk.

    Background:

    Purchased for $350,000. It's 3500 square feet. There are 3 units: a 5 bedroom (yes, 5 bed), 2 bedroom, and a 1 bedroom unit. We will be living in the 2 bedroom. We have a renter in the 5 bedroom for $1925. We will soon have a renter in the 1 bed (it's not renovated and it's a friend, we will renovate soon) for $500. That means that after mortgage, taxes, and insurance we are househacking and breaking even, which I think is a success (especially because we have don't have the 1 bedroom to its full potential.)

    Yes, the area isn't high end. Yes, we had a lot of very unqualified applicants. However, it only took 10 days to find a very qualified applicant.

    We have enjoyed living in the neighborhood. I feel 10x safer here than I did in Seattle, and people are super nice.

    Maybe we are foolish, but the numbers work out. Go with your gut. However, don't get desperate. We refused to buy anything that the numbers didn't fully work out.

    Hope this helps!

    HI Erin,

    I've had similar experiences that people seem friendlier and are warmer in Tacoma than in Seattle/bellevue maybe its just the faster pace of life?

    When I first came from orange county I thought everyone was trying to sell me stuff but I guess being friendlier is a normal thing in south sound. 

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