All Forum Posts by: Brian Hughes

ALL CAP rates (see what I did there) suck in seattle, as they do in most large metro areas. Right now in city listed properties often the advertised cap rate is 3-4 percent; in many cases these represent properties which are being marketed for redevelopment or with the expectation that new buyers will increase rents 20-30-40 percent. Outside the city 5 percent-ish is more the norm. Your best bet for comparatively higher cap rates is the south end (burien, renton, kent, auburn, des moines, etc). Though some of those areas are quite 'hot' since everybody else who wants a strategy of more than just appreciation is looking there too. OR look further out - outskirts of tacoma, and in more rural towns - if you can find someplace that has a viable economy or proximity to larger metro area many such towns also have a shortage of good housing.

If you are charging separately for things like parking,  utilities, storage lockers, or pet rent,   roll it into the rent with the next lease renewal or rental agreement update.   (if legally allowed,  for example certain properties in seattle must charge separately for parking and make it optional)  -  That way the tenant can't refuse to pay their share of utilities leaving you with zero recourse to enforce payment.

OR,  if feasible,  require utilities to be in tenants name or install submetering system and use 3rd party to bill back for utilities.  that way at least the tenant at least gets a hit to their credit if they don't pay.

Several different municipalities/jurisdictions in WA have various rental rules on top of the state RLTA.   Bellingham, Tacoma, Kent, Renton, King County, etc.  Burien is considering them now. I'm sure there are others I'm not remembering,  these are just the areas I'm at least somewhat interested in which I know have done things.   Usually these fall into 2 groups:   Additional protected classes,  mainly source of income,   and inspection/registration requirements.   Tacoma has gone further though not as far as seattle with regulations around terms of lease, just cause termination, etc.   I'd check each city/county combination you are considering investing in.

The various comments on Sec8 being a protected class have all been accurate at various times but at this point,   source of income discrimination in WA is illegal statewide:

https://www.seattletimes.com/seattle-news/politics...

https://app.leg.wa.gov/billsummary?BillNumber=2578...

I've never had a sec8 tenant myself (several applicants were sec8 but none qualified on credit standards or other legally usable criteria)  but like others have echoed all LL's I have talked to said it was a mixed bag. 

Since you are looking to buy the building,   you have the ability to evaluate the tenants before you commit;  in fact much more thoroughly and against any standard you wish;  unlike if you already owned the place and they were applying to rent.   Make sure you can tour the occupied units,   and knowing the length of time the tenants have been resident you can get a pretty good idea of their "quality" for lack of a better term.   Ask to meet the residents.   Its probably a bad sign if the seller doesn' want to arrange it.   Its likely if the residents are good they will WANT a buy-and-hold LL instead of a developer to be interested in the place and should be willing to talk.   If the units are reasonably clean and in good condition and there aren't piles of stuff/junk everywhere and the place doesn't smell like mold, weed or cigarettes its a good sign.   So is a yard/grounds free of excess clutter/junk/dead cars etc.  While you probably can't re-screen the tenants (check the leases,  some have a clause allowing for that)  you might be able to infer if any occupants are employed,  going to school or otherwise showing signs of responsibility.

Agreeing with prior posts I would be VERY CAUTIOUS about terminating the leases for any reason even remotely relating to their sec8 status,  especially if they are otherwise in good standing.    If they aren't at market rate,  yes raise the rent (QUICKLY before WA passes some form of rent control)  and if the current leases don't bill back for utilities,  consider putting that in place.   It can be done legally even without submetering provided you use the "RUBS" method defined by the city/state/whoever it is.

The Sec8 tenants may scare off a lot of other would be investors.   So this could be an advantage.   Just be sure to go in knowing the likely tradeoffs and build that into your model.

yes, plenty of that type of property in seattle. But they may or may not be on the market, and may not meet your budget. Your best bet for neighborhoods with a lot of that kind of property are older, closer in neighborhoods, but those are also going to be the most expensive especially in the north end of seattle. Better option considering your implied family status is probably to find a SFR with an ADU or good ADU potential, and go north around or just across the city boundary into lake city/shoreline/edmonds/mountlake terrace etc.

Also make sure you are well versed on city of seattle rental ordinances and likely changes in laws at the state level regarding same. Seattle is NOT a landlord friendly jurisdiction. Having an ADU as opposed to an actual duplex will exempt you from some but not all of that.

Good Luck

Maybe market to people living in Mobile home parks (with new enough homes that they are moveable) to move to your lot on a rent to own basis,  or something like that.   Lot of such MHP's are being shut down / redeveloped.

Total spitballing,  I have no experience with such.

I think I hit $1M at about age 34.   IIRC celebration consisted of a tub of ben and jerrys.   I've got a tech career and started in RE with a fixer house at about age 25 then bought my triplex at age 30 and house hacked there and then at my (pending sale) duplex up until just recently.    I save a lot and have aggressively paid down mortgages,  and refinanced several times with different strategies and reasons.   I rarely buy anything significant that is turn key  (real estate, cars, major tools/equipment etc) preferring to fix things myself and get the equity.   Never had any debt except mortgages.   (thanks to parents for paying for college)  I'm frugal on most things (though I eat out way too much)  The runup in seattle area RE hasn't hurt either,   though I also rode through the dot com crash about a year after buying that first house, and the first RE crash a couple years after buying that triplex;  In the former case especially luck was a factor in staying employed,  else my life could have gone in substantially different direction.

I really like a comment prior about producing more than you consume and making things better.   I've always wanted to make a bumper sticker saying something to that effect.

A good area to take a walk and look for stuff that might fit on your lot other than more townhouses is the University district neighborhood west of campus between brooklyn and the freeway. A lot of older SFR boarding houses in that area are being replaced by stuff that sounds like what you are considering.

Sounds like you should find some townhouse developers and see if they would build for you.    It sounds like similar scale to what they typically do.      I've heard numbers from about $200-$300/sf for building townhouses in seattle but im no expert.   

MHA rezone just changed your calculations,  so be sure to consider that. 

I recently moved to Upper Rainier Beach / Skyway area  (about 8 miles S of downtown seattle on the hill above renton)   So far,   its looking like it was a good decision.     there are respectable homes in your price range though most will need some cosmetics or a bit of love in some way or other.   For example:

https://www.redfin.com/WA/Seattle/9624-52nd-Ave-S-...

came on the market recently a block from my new place.  I've toured it,   it needs cosmetics but is clean and fully functional and should be fine with conventional financing.   No holes in the walls, raccoons or poop buckets to be seen.

This area is one of the last "affordable" areas in or close to seattle, and it does have some challenges still but given the proximity to Seattle and Renton and light rail transit nearby and various other factors,   its gonna keep improving as long as the big one doesn't hit or Mt rainier doesn't go kablooie.