My agent has recently shared a listing of a potential monthly income rental property in Puyallup are
4 Plex (2 of 1 br/1ba and 2 of 2br/1ba)
Located in South Hill neighborhood in Puyallup
Built in 1976 (needs some renovation)
Current Monthly income: $3k 5% CAP Rate(With renovation can potentially increase monthly rent up to $4.5K 8.9% CAP Rate according to Rentometer.com)
Knowing that real estate market in Greater Seattle area is slowing down, should I pull the trigger on this opportunity?
Your knowledge, opinions will be appreciated!
There's a lot of info that would have to be known in addition to what you've provided to say yay or nay.
- How known are those numbers? Both the current ones and the projected ones?
- What's the condition of the property?
- What's the neighborhood like?
- What kind of tenant quality live there or would live there?
- Do you have a specific estimate for the rehab or are you just guessing?
You don't have to answer those necessarily to me, but those are the things I'd have to know in order to advise someone one way or another.
Thanks @Dan Cumberland
I am also seeking a cap rate of 10% or higher but have not been able to find such opportunities but at the same time do not want to sit on the sideline and not learn anything. Are you an agent? If you have opportunities that yields 10%+ I would love to connect and see if there is anything I can also help you with. Thanks
Hey @Sam Choi I have a rental in Puyallup which I purchased many years ago, before I know anything about cap rates, or ROI, or ARV, or tenant screenings, or property management or even that one should get inspections before buying. I knew nothing about real estate or investing. This is a rental I like to call the "little rental that could". Could what? Produce monthly cash flows every month since I owned it. Why? Location location and location. I see no reason why this south hill property would not do the same for you. Of course buying at the right price (unlike me) would be best for your long term goals. I am a long term buy and hold kind of investor, my time horizons are such that my bad purchase price turned out ok, and its still turning out well for me every month. Buy at reasonable discount, do reasonable fix up, get good property management, price it competitively, keep up the property and because South Hill is almost perfectly situated between Seattle, Tacoma and Olympia, the location will do the rest.
@Sam Choi - I'm not an agent, but I am an investor based in the Seattle area. I've been focusing my investing efforts out of state in order to get a lower cost of entry and better cash flow (not that the latter is not possible here, but deals are easier to come by out of state).
It looks like @Dan Leaman might be a better connection, as he's making it work in the area you're targeting. (Great work Dan!)
All of that said, even out of state I've never found 10%+ cap rates on the MLS. I've had to find them by finding motivated sellers and making offers that work for my numbers (below asking price).
@Sam Choi what I meant by "reasonable" was this: Most sellers overvalue their property, when you see a kitchen that needs replaced they see a kitchen that has been working perfectly for years. When you see a roof that has 2 years left they see a roof they paid for 15 years ago and will possibly last another 15 years. Run down the list carpets, floors, paint, doors, toilets windows... etc. A reasonable buying price considers you may have to replace many or all of these things in the next few years. Also consider the fact that we have been seeing rising prices in housing for the last few years many have argued that we are do a correction, (I am neutral on this) and its a mute point if you cash flowing now. Good luck, let us know how it goes. This is the place you want to come for information and cheering.