Where to buy rental property in Seattle (Tacoma, Bellevue: for sale, real estate)

[livinglife33]

Where do you guys/gals think is the best area in Seattle to buy rental apartments for investment in the Seattle area? My budget is < $2million

[homesinseattle]

You mean an apartment building? Always the best investment to buy as close as you can to the core of town, in this case Seattle or Bellevue.

[livinglife33]

Yes, I mean apartment building. This is a pretty dumb question and I apologize in advance but where in Seattle or Bellavue is the core?

[perigee]

Your limiting factor won't be location, it will be inventory. There are only a few apartment complexes for sale and they aren't in the most desirable location, or in the best shape. It's beyond a hot market. Why sell when you know that it will be no problem to find tenants and that you can increase the rent every year?

Good luck on your search.

[homesinseattle]

Living life, I just mean closer to the middle of town. Other spots like West Seattle, Kirkland would perform well too. I know some places.

[mkarch]

Originally Posted by perigee

Your limiting factor won't be location, it will be inventory. There are only a few apartment complexes for sale and they aren't in the most desirable location, or in the best shape. It's beyond a hot market. Why sell when you know that it will be no problem to find tenants and that you can increase the rent every year?

Good luck on your search.

I'll hazzard a guess that the reason for sale is usually that the current owner doesn't want to deal with renovating the building in order to cash in on the higher rents - but someone else is willing to pay a premium for the opportunity. At least in my observation, the number of buildings for sale goes up during periods of rapid rent increases.

As a side note, the city of Seattle just instituted rental inspections across the board. Previously these were done "as reported" whereas now they're mandatory. This is going to have the effect of pushing more unreported "slum" buildings onto the market. I use the term lightly, sometimes they're just old buildings that the tenants put up with in exchange for lower rent. The across the board inspections make it more difficult to own and rent these types of properties now.

[livinglife33]

Originally Posted by mkarch

I'll hazzard a guess that the reason for sale is usually that the current owner doesn't want to deal with renovating the building in order to cash in on the higher rents - but someone else is willing to pay a premium for the opportunity. At least in my observation, the number of buildings for sale goes up during periods of rapid rent increases.

As a side note, the city of Seattle just instituted rental inspections across the board. Previously these were done "as reported" whereas now they're mandatory. This is going to have the effect of pushing more unreported "slum" buildings onto the market. I use the term lightly, sometimes they're just old buildings that the tenants put up with in exchange for lower rent. The across the board inspections make it more difficult to own and rent these types of properties now.

There goes my dreams of being a slum-lord J/k ! I'm just interested in investing in a rental apartment as I have some money lying in the bank and I'd rather invest it in properties than in Vanguard index funds. Any advice is much appreciated as I've never done this before.

[homesinseattle]

Again, there are options. Savvy investors are also picking up buildings in areas that have a been a bit off the radar but poised for breakout. One of the favorites for my investor clients is Everett, about 25 miles north of Seattle. There are good places that come on the market, you just have to be ready, informed and decisive.

[Ira500]

Traditionally, when looking at where to buy investment property, people looked at CAP rate, which is pretending you are paying cash for the property, estimating the annual rents, and subtracting all expenses( taxes, insurance, maintenance, landlord paid utilities, etc, and coming up with a percentage.
A higher CAP rate usually suggests that it is in a less sought after neighborhood, or is mot expected to appreciate as much as a building with a lower CAP rate.
But in recent years, people are buying buildings more with an eye towards appreciation, and are sometimes even willing to put up with a negative CAP rate when they believe that they'll get paid handsomely when they sell.
So...buying a building in Ballard might mean that every month, you'll have to pay over and above what the rents bring in, but you anticipate that in 10 years, you'll more than make up for it when you sell. if you bought a building in Everett or Tacoma or Rainier Beach, you'll make money every month, but you might have lesser quality tenants, and a smaller likelihood that the return will be as good when you sell.
Personally, I see it as more risky when you're buying rental property that you have to subsidize( or the positive return is tiny.) Compare it to a large cap, dividend growth mutual fund, which might currently pay about a 3% dividend. Many of these types of funds have beaten the S&P 500 index for years, and they're likely to keep doing what they've been doing over the next ten years. From an apartment building, I'd want a similar or better CAP rate. Rents have gone up, so that helps. But buying rental property in a sought after area in the current, frothy market is not usually much of a return in the most sought after areas. And they're continuing to build apartments like crazy. I'd look at the recent report that was in the news predicting where the most growth would be in the state over the next ten years. I'm pretty sure Seattle, Bellevue, Renton, and Mountlake Terrace are on the list. Seattle's getting more crowded. The downtown and Seahurst neighborhoods in Burien strike me as places that will be more sought after ten years from now, because I see Burien as not as appreciated as it will be, since it's a really quick drive to downtown Seattle, has Puget Sound waterfront, and has a certain odd charm and hipness. I'm still preaching Burien. Burien is the next Ballard.

[eightbitguy]

If you're coming here first and you have $2 million to spend, you're most likely not serious. You need to be speaking to a real estate agent or broker that specializes in apt buildings. Plus, $2 million isn't going to get you much in the "core" of seattle or bellevue. You might be able to buy an 8 unit building in Ballard for that, but it will have been built in the '50s and need improvements. Plus as others have said, no one is selling those properties now, as they know in 2-3 years they can get 50-100% more when those get bought up in lots to put up larger buildings.