All Forum Posts by: Suzanna Smith

@Vasily R. I'll tell you our situation, which I asked about here on BG and am getting absolutely railed for proposing. It seems like making moves in Seattle is going to be speculation unless you are making cash offers. We live in a 3/2.5 luxury townhome in W Seattle right now and just bought another home with a ready to go ADU in W Seattle (under list price) with traditional financing. We are keeping the townhome as a rental. Here are the numbers for us:

Current mortgage: $3400 + $250 HOA (pays for W/S/G) = $3650/mth

Lease agreement: $3500/mth (plus we offered a $500 cash bonus for approved application); 1yr month lease = $3,458

New mortgage: $3950

Projected ADU rental income (not yet secured): $1200-1500

We are in negative cash flow (-$192/mth) on the townhome (plus anything not covered by warranty or insurance goes wrong with a 2019 new build), but selling right now isn't an option and staying means we just wait until everyone else is back in the market out-competing us. 

Things have to go right for us (this is speculation, not investment), but overall our monthly cost savings are anywhere from $500 - $1000 depending on the rent from the ADU. To us, we are betting that the market will continue to rise (or dip then rise) and we will be better positioned to sell at a later time and rent prices will increase for a 3/2.5 townhome. If we are wrong, we will pay for a very valuable lesson. This is a long term position for us and luckily we have jobs that can help us weather most storms.

Good luck and I look forward to hearing how you proceed!

@Flavius Alecu I’m curious to hear how this went! We are about to do the same thing in the Seattle market. 

@Keenan Fitzpatrick thanks, this actually makes me feel good about going forward with caution of course and playing the long game. The $66k is safe. It was just the difference between selling before or selling after the year we decided to rent. It isn’t part of the new deal - it’s held back for security and emergency. In my mind, the appreciation over the next 5 years outweighs the monthly deficit and that is the minimum amount of time we would hold in this new position. Rent prices will bounce back at some point and we can start to see more of a break even, and with some luck a little cash flow. And we would  continually assess whether the selling makes sense and placing that money in another more cash positive option. If we sold at this point, we would do better just to keep it vacant. There are some major transportation improvements underway here that we believe will improve home prices in that term. It’s speculation. We may lose. 

Anyway, I’ll post again when we have a resolution one way or another, which we will know in about 10 days. I appreciate all the feedback. 

@Dan H. should I be concerned about the cost of a kitchen on a townhome built in 2019? Or a water heater under a 5 year warranty at 1.5 years?  I get it. You don’t like this deal. Noted. Thank you for your encouragement to educate myself more, twice, and for the math lesson. I’m taking it into consideration as part of our risk calculation. 

@Michael Haas thanks for the reply. It’s 3/2.5, 1700 sq ft right at Lincoln Park. It’s really maintenance free for the short term, long enough to get us over the hurdle of losing if we sell. We understand the normal rules are not applying here. The purpose is to situate ourselves in a better option to reduce our monthly costs, own two homes in the Seattle market (waiting for that new bridge and light rail!), and force some easy equity out of the new place...and then do it again (and better?). I would love your opinion on pricing. You can DM me if you can’t find it on Zillow.

@Dan H. I hear you. The 50% rule sounds lovely but it’s not reality. Here’s the alternative: we drop the new home and continue to pay $3650 a month, or we buy the new home, pay $3900 minus rent for the studio/1bd ($1200?) and subsidize some ($200?) on the current property (basically hold at known costs) and be paying $2900?. We have contingency if something really hits the fan. I do not know another way to get ahead in Seattle right now...Not without making unacceptable lifestyle sacrifices. Believe me, I’m skeptical too but our previous experience says it’s possible. We just closed up and sold a rental in Tacoma where we operated at a loss for a year, then cashed out big time on the sale. Spent about $3500 for PM and small maintenance (granted, we were lucky nothing went wrong and that was an older, bigger more high risk home), made $66k for holding for just that extra year and betting on a strong market. We see a similar vision here just a little longer term. We don’t need cash flow right now. We need lighter monthly expenses and equity. That’s our game plan. 

Sounds like 2 votes for dropping the deal and one a maybe...

@John Barrett I missed a few details that may be important. This place was always designed as an eventual rental in our strategy. It’s why we chose it, and for a number of different reasons at the time (no maintenance, Easy access). We just bought this house a year and a half ago so we would lose money in the sale. We just sold another home (we lived in then rented for a year) for a good profit. The cash from that home is our down for the new one. We’re essentially leapfrogging. But I take your point. We would prefer to cash flow and keep the equity gain, but I think at this point we might need to make a choice between the two.

Thanks for your insight,

Suzanna

I'm looking for some feedback on my calculations, and for some insight from those that are working in the Seattle (or like) market right now. 

We have a luxury town home we are currently living in that we would like to convert to a rental, and are under contract for a SFH with a lovely studio apartment that we plan to make a 1 bedroom upon move in. We currently pay $3400 plus $250 for HOA (which includes W/S/G for the town home) and our projected payment for the new house hack home is just over $3900.

We listed the town home for $3800, but are only getting a few bites. We think we need to reduce it. We aren't opposed to subsidizing the rent if the long term makes sense. We expect/hope we can rent the apartment in the new house for atleast $1200 and likely $1500. 

Our current numbers have us up somewhere near $1,000 saved a month, plus equity. My question is, how low is reasonable to still make this a good deal and get the town home rented ASAP?