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Old 10-26-2016, 02:42 PM
 
Location: Portal to the Pacific
8,736 posts, read 8,620,569 times
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We want to diversify our assets to include a rental property. We're mostly thinking of one in our neighborhood, which we really like, but we're still open to other ideas, especially because this will be with us through various phases in our lives. We plan to buy in 2-3 years. We'll be able to afford $500-700k. 3 bed would be ideal.

I think we want a rental that we wouldn't mind living in, especially once the kids are out of public schools (2025), when we'll be in our later 40's/early 50's, but I want the property to be attractive not just to my future older middle-ager self, but to a wider range of people.

So far I'm thinking Burien or West Seattle if closer in. North Bend or Snoqualmie if further out.

I like Edmonds a whole lot.

What about Des Moines, Federal Way?

Any advice? Especially like to hear from people that have rentals.
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Old 10-26-2016, 03:27 PM
 
2,685 posts, read 6,027,477 times
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What you would buy to live in and what you would buy to maximize returns will be quite different. That said in this market you may decide to buy nicer, have lower returns BUT less hassle (read: more qualified tenant, less hands on management required) and rely on potential appreciation for your returns. A 700k property isn't your typical property a seasoned landlord would target but it can be easier to manage.
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Old 10-26-2016, 04:18 PM
 
Location: Arizona
3,148 posts, read 2,708,012 times
Reputation: 6060
Quote:
Originally Posted by flyingsaucermom View Post
We want to diversify our assets to include a rental property. We're mostly thinking of one in our neighborhood, which we really like, but we're still open to other ideas, especially because this will be with us through various phases in our lives. We plan to buy in 2-3 years. We'll be able to afford $500-700k. 3 bed would be ideal.

I think we want a rental that we wouldn't mind living in, especially once the kids are out of public schools (2025), when we'll be in our later 40's/early 50's, but I want the property to be attractive not just to my future older middle-ager self, but to a wider range of people.

So far I'm thinking Burien or West Seattle if closer in. North Bend or Snoqualmie if further out.

I like Edmonds a whole lot.

What about Des Moines, Federal Way?

Any advice? Especially like to hear from people that have rentals.
500k-700k would be put to better use in a small apartment, 5 units or more.

What you're describing is too much house to operate well as a rental. The taxes and insurance are too high, and the tenants you'd need to get are a small demographic. The house you'd like to live in someday is probably not going to operate well as a rental.

A good rule of thumb to gauge "cap rate" is to multiply the monthly rent by 12. An acceptable cap rate is 10%. To get a 10% cap rate on a 600k house it'd have to rent for 5k per month not incl. utilities. That is a very narrow market.

A 5 unit/600k apt @ a 10 cap will require rent @ $1000 a door.

Which investment do you think will best maintain occupancy? Which will be cheaper to maintain? What is the damage risk with 5 cheaper units vs one very expensive unit? Which would be more forgiving in a soft market?

I'd aim to rent to a market of working class wage earners and buy an apt that was designed to operate as a rental property than trying to use a bigger expensive house that was made for a family to grow up in as a rental house.

My advice is worth every penny you paid for it, BTW.

Last edited by tommy64; 10-26-2016 at 04:35 PM..
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Old 10-26-2016, 06:20 PM
 
Location: Portal to the Pacific
8,736 posts, read 8,620,569 times
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Quote:
Originally Posted by noah View Post
What you would buy to live in and what you would buy to maximize returns will be quite different. That said in this market you may decide to buy nicer, have lower returns BUT less hassle (read: more qualified tenant, less hands on management required) and rely on potential appreciation for your returns. A 700k property isn't your typical property a seasoned landlord would target but it can be easier to manage.
This is pretty much what we're aiming for... but where?
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Old 10-26-2016, 10:46 PM
 
Location: Independent Republic of Ballard
8,062 posts, read 8,298,051 times
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Look for a house with a MIL unit? That way, you'd have two rentals.

The only thing is that there is a lot of uncertainty right now, with China trying to find a soft landing and UK/Europe in turmoil. If there is a downturn, it is the more expensive rental that's likely to sit empty.
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Old 10-27-2016, 12:45 AM
 
9,618 posts, read 27,250,289 times
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When people buy a 700,000 dollar house to be used as a rental, they're not usually thinking about immediate positive cash flow, and are instead banking on long term appreciation. The problem with that is that most of the time, the rents will not cover mortgage, insurance, and taxes. You'd need to cover the extra costs every month.
Having been a landlord a few times, I don't think it's something that's ever hassle free. A house in a place like Burien will cost less than Issaquah, and will have a greater chance of being cash flow positive, but might not appreciate as much over the long haul.and if the rental house is close to where you currently live, that will make things easier. But I'd recommend exploring the areas you're considering. Take a trip to Burien. Go to the park. Go have dinner. At the very least, you'll get to know parts of the Seattle area better.
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Old 10-28-2016, 11:53 AM
 
1,054 posts, read 1,035,968 times
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Amen to that, Ira! Being a landlord isn't always easy.
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Old 10-28-2016, 04:24 PM
 
Location: Seattle
8,157 posts, read 8,215,140 times
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I don't think you could go wrong buying in West Seattle, very high rental demand there.
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Old 10-28-2016, 05:39 PM
 
Location: Portal to the Pacific
8,736 posts, read 8,620,569 times
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This is no way a definitive plan BTW. Still a few years away at least..
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Old 10-29-2016, 12:36 AM
 
269 posts, read 295,545 times
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Quote:
Originally Posted by flyingsaucermom View Post

Any advice?

Were it me, I would plot the planned/anticipated LIGHT RAIL lines and target nice abodes which are VERY near to plotted rail stops.

Those will have steady demand down the line and plenty of upside value.

The picture(s) will become more clear by the time you're ready to buy.

If the area keeps threatening to outgrow its land mass then properties near the rail, and well away from the core will appreciate markedly, hopefully with you there for the ride up.
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