Greater Seattle areas for investment property (Tacoma, Bellevue: rentals, condos, mortgage)

[rikusumita]

What areas/neighborhoods in the greater Seattle area would you recommend for an investment property (condo or townhome or single family residence for under $400k)?

[RVD90277]

my 2 cents...downtown seattle.

[ctr88]

I'm interested to in others thoughts about good places for rental property in Seattle too. Ideas? For me I have to get a solid positive cash flow from day 1 with 20% down though or I don't buy at all. Not sure downtown I would be able to throw off a positive cash flow with 20% down.

What are some up & coming areas that would work good for rentals? What type of prices/rents could I expect?

[Dport7674]

My Uncle runs a business up there, cleaning apts. between tenants..He said a lot of the landlords that hire him seem to be buying south of the city, around the White Center area.

[ctr88]

Someone I know mentioned Everett for rentals.

[Ira500]

If you're going to invest in a house or townhome or condo to rent out, the two things people think of as "good" are:
1. Places that are going to appreciate in value, and/or
2. Places that give you an immediate positive cash flow.
They're not necessarily the same. A house in Sammamish or Ravenna or Ballard or a condo in downtown Seattle or downtown Bellevue might appreciate in value, but in most cases, the mortgage payment will be higher than the rent that comes in. The speculation is that the increase in value will be higher than the subsidy you'll be providing every month, but it's a risk. Being a landlord can be a pain in the butt, so why do it if you're going to lose money every month, hoping to make money in the end when you sell?
The places that will give you an immediate cash flow are generally going to be in areas less prestigious, less sought after, and less expensive. In the Seattle area, that would include places like Everett, Mountlake Terrace, Lynnwood, Renton, Kent, Auburn, White Center, Skyway,Tacoma.
An area that might turn out to be a good investment is not at all necessarily the same area you'd want to live in.

[rikusumita]

great point ira500.
what do you all think of areas close to microsoft and costco campuses in redmond and issaquah for condo/townhomes? it seems they could offer positive cash flow (assuming low vacancy given the proximity to these large corps)!

[ctr88]

Excellent answer Ira500 you hit the nail on the head.

I have been a landlord for a decade. I definitely learned the hard way that positive cash flow is a must. Like Ira says, why spend all the time it takes finding, maintaining, managing a rental if it's not going to pay you every month and give you an immediate return on your cash invested? People often don't realize if they lose money every month on a rental, even IF it appreciates significantly over say 5-10 yrs, you don't make as much as you think after accounting for that *accumulated* loss over 5-10 years. Also, you only get to keep about 60 cents on the dollar of your appreciation if you sell outright (after paying cap gains tax, Realtor commissions, closing costs, etc...). I think a lot of new rental investors make the mistake of falling for the property in the sexy neighborhood that loses money every month on the hope it will appreciate $100k in a few years.

That being said, it can be easier to manage properties in areas people want and have to rent (which is usually the sexier areas). You get better credit quality tenants and the property rents up really fast. And in recessions if rents fall and vacancies go up, the outlying less desirable areas get hit much harder with vacancies and rent decreases.

[amaiunmei]

Originally Posted by rikusumita

great point ira500.
what do you all think of areas close to microsoft and costco campuses in redmond and issaquah for condo/townhomes? it seems they could offer positive cash flow (assuming low vacancy given the proximity to these large corps)!

I'm sure these places exist, but I have not seen them. Particularly with condos, once HOAs are factored in, you are barely breaking even or underwater.

[Hemlock140]

Originally Posted by rikusumita

great point ira500.
what do you all think of areas close to microsoft and costco campuses in redmond and issaquah for condo/townhomes? it seems they could offer positive cash flow (assuming low vacancy given the proximity to these large corps)!

Those are hot selling areas, no deals to be had, so a lot harder to make money on them even with the higher rent and demand. You won't find much in your price range and you may have multiple offers to compete with.