Even with constant construction, real estate inventory in Seattle remains low. We just keep growing, and there’s no sign of slowing at this point. New rental regulations and increased apartment stock, however, may lead to more former rental houses landing on the market. The next couple of years could be a great time to pick up a diamond in the rough.
But the bigger question is: Are you the type of person who will make a savvy buy decision as a first time real estate investor?
Our Real Estate Investor clients who win in this market have a consistent perspective about the process:
- Realistic Return on Investment – 4-8% return per year.
- Buy for the Long Term – No sell-off in case the market takes a bad turn.
- Rent the Home Under Market Value to Ensure Long Term Renter Stability – Nothing costs you more money than a long-term vacancy in your home because you price it too high.
What Do Our Savvy Diva Dweller Real Estate Investor Clients Buy?
- Homes that need a little TLC – Majority of buyers right now do not have the time, energy, money, or courage to see a diamond in the rough. A savvy Diva Dweller Real Estate investor can see past dated kitchens, weird layouts, and years of neglect.
- Avoid Multiple Offers – Yes there are a few homes that are not selling in multiple offers in this market. They are typically overpriced and poorly marketed. Jump on them!
- Homes Outside of the Urban Core – believe it or not your money goes farther in more of the up and coming neighborhoods than it does in the typically fancy hoods. You can spend $100K as a down payment for a condo on Capitol Hill and barely break even on your mortgage. Or you can spend the same amount as a down payment for a house in Beacon Hill and see a 4% return. Your choice!
Questions to Ask Yourself to be a Savvy Diva Dweller Real Estate Investor
What Is Your Number One Priority?
- Income
- Investment
- Tax Shelter
After Purchasing Your Diva Dwelling What Type of Services Needed?
- Rental Assistance – Rent Guru (One month of rent)
- Property Management – (One Month of Rent and 10% of the Gross Rental Income)
- I can do it on my own – Your time
How Are You Purchasing the Property
- Liquid Cash – You have the cash in the country!
- Investment Loan – 25% or more down and higher interest rates than traditional investment.
- Owner Occupied – Traditional loan – meaning you are buying a Tri-Plex and plan on living in one of the units.
What Type of Property Are You Purchasing?
- Condo
- Townhouse (no HOAs)
- Single Family Home
- 2-Plex
- 4-Plex
- Multi Plex
What is Your Ability Or Willingness to do Manual Labor?
- No Work / Beautiful Condition – I’m more of a Condo or a Townhouse type of person!
- Can Do Some Work – You have remodeled your house. You can do this!
- Looking Forward to a Full Renovation – Hire a contractor and invest another $25K
What Type of Neighborhood Are you Thinking?
- Core Seattle Neighborhood (SLU, Capitol Hill, Queen Anne, Belltown, First Hill, Eastlake, etc)
- Residential with Good Schools (North end, N. Beacon Hill, Admiral, etc)
- Up-and-Coming
- Gayborhood
- Next Gayborhood
Have You Talked to a Tax Account About Your “Depreciation Deduction”? If so, what is the rate they gave you?
Are you paying utilities?
What is your ideal Cap Rate?
Okay, I know you looked online and everyone says a 5 percent Cap Rate is ideal. But guess what? Only folks who bought in Seattle 20 years ago have that kind of Cap Rate. Most folks run around 3-4 perecnt. But the bigger item to look at is your overall return on investment. Ask one of the Divas to walk you through the model on their fancy spreadsheet.
WHEW! That was a lot of questions, and I bet you have not even considered some of them yet.
What we do with our Savvy Real Estate Investors is take all of this information and run it through our magical rental spreadsheet. As soon as we find a possible candidate, we run it up against the model and allow our super Savvy Real Estate Investor Diva Dwellers determine if it is a good fit for them.
Next Steps when Investing Seattle Real Estate:
Understand the Market! Rents will flux overtime. It is important that you do some research on understanding how to price your rent, occupancy, the market rates, employment levels, changing family sizes, and the lifestyle of potential renters.
Be Educated! You also need to read up about fair housing laws and the unique laws we have in Seattle to protect renters.
Lastly…Work with a real estate team that understands what your goals! We’re here to help if you have additional questions.
