Which is the best investment?

Asked by Annie, Seattle, WA Thu Jan 24, 2008

We are a young couple, wanting buy a home to live in. We plan on starting a family soon. We have seen a house we can afford in Bellevue (Phantom lake) area. The street it is on has a lot of junker cars and run down homes on it. The Bellevue school district has a good reputation, but Phantom lake elementary has low test scores and the general area is pretty run down and uninspiring. We are also looking in the Juanita/Finn Hill/kingsgate area (Kirkland) and south Bothell. This area seems more inspiring (there is a really trendy shopping area just built in Juanita and it is close to lake Washington) but I am not sure if the home values will appreciate as much as they will in Bellevue as Bellevue ...downtown at least is transforming before our very eyes). Which do you think is the best long term investment? what kind of time frme do you think it will be till the lake hills/Phantom lake area improves?

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Sean Goddard, Agent, Beaux Arts Village, WA
Wed Mar 19, 2008
You will get a better value and a nicer place to live in the Jaunita area. Parks, access to Lake Washington and really good land value get you a newer and better home. Phantom Lake is full of G.I. Bill housing from the 50's and looks it. I have lived in Juanita. Its a great place to live.
1 vote
Shannon Wood…, Agent, Issaquah, WA
Sun Aug 10, 2008
My answer may be a bit polarizing to those who see real estate as only an investment, but I would not put the 'investment' component on anywhere near the same plane as the 'starting a family' component. Of course everyone knows that for most folks, the home they purchase is their biggest investment. And, yes, you certainly want to look at re-sale values (schools, neighborhood, functionality, etc.).

However, when you think of your plan to "start a family soon", let this be your best guide...see yourself there 1, 3, 6 years down the road.....taking walks throughout the community...playdates down the street.....getting a few quiet moments away to walk to the coffee shop. Do some research into the schools and look at them from other standpoints that may be of interest to you: teacher student ratio, music/art programs?, teaching philosophy, etc.

I can almost guarantee that those observations you have made about the 'junker cars' and the 'run down homes' will become like grains of sand chaffing you as time goes on. In short: You've Got to Love Where You Live!!
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Evin Morris, , Bellevue, WA
Thu Jul 31, 2008
Have to edit my answer slightly- just looked at "Schoolmatters". Appears Lk Wash test scores quite a bit better and Sammamish somewhat worse than last time I looked. . . What this means for results 16 years from now, who knows?
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Evin Morris, , Bellevue, WA
Thu Jul 31, 2008
I'm not entirely unbiased. (Lifetime Bellevue resident and two 1/2 year resident of "Lake View Meadows" a newer tract built in the late 80's next to the Phantom Lake Pool.) What prompted our decision to buy here is as follows: (1) Much of the area is already moving upmarket- more and more of the homes in the area are getting nice cars/landscaping. (2) MSFT is just about to occupy four newly constructed midrise buildings on the old Bellevue Airport site- and lots of those relatively affluent "young people starting families" who would like to have a SFR from which they could easily walk/bike to work. (3) Phantom Lake Tracks into Sammamish HS, which is a "top 100" nationwide high school (although not a "top-20" like Bellevue or Newport, this is far better than any Lk Washington SD school.) Also, the commute from Juanita to anywhere having significant job activity is a bear (Through Totem lake area, then -ugh- 405.) (4) Public transit is much better, and if we ever get into a "gas rationing/unavailable" scenario, it is fairly easy to walk/bike to the Eastgate P&R. Overall, I'd think that the Phantom Lake area is a much better investment, in lifestyle, in LT upside, and in mitigation of downside risk. (We looked in Juanita, and agree it's charming, but the traffic issues ruled it out fairly early for us. )
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Don Tepper, Agent, Burke, VA
Mon May 26, 2008
I don't know Seattle, so I'm in the same position as Tom. However, I've lived in (and through) some of the same processes you're describing.

It's fine to be in on the early stages of gentrification, but it often isn't the best choice for a young couple considering starting a family. A couple of issues: First, such areas often aren't as safe as the more established or trendy communities. The "quality of life" often just isn't as good. What you're often doing is speculating on the future--that the area will be cleaned up, new folks moving in, and so on. Those early years can be difficult.

Further, it's often difficult predicting how long the clean-up process will take. Back in 1980, I bought a condo in an "up and coming" area of Washington, D.C.--Logan Circle. The area had been fabulous in the 1880s-1920s, but had fallen on hard times. There were still the mansions around Logan Circle, but there were also crack houses, drugs dealers and women on many corners, about two liquor stores on most blocks...that sort of thing. The "word" was that the area would turn around in a couple of years. Well, just in the past couple of years it's become trendy. Those guestimates on the Logan Circle area turning around were off by about 25 years. If you move into a similar area, with a similar time line, you could be grandparents by the time the area turns.

Some areas turn much quicker than that and, as I said, I'm not an expert on Seattle. But that's the sort of issue you should be examining. And the questions you should be asking.

Also, just to return to Logan Circle for a moment, I saw plenty of young couples move there, for the same reasons you did. And, to add something, the DC public schools weren't up to the same levels as those in the suburbs. When those young couples started having children, and education became a higher priority, most soon moved to Virginia or Maryland.

Just something to factor into your equation.

Finally, you ask about which would be the better long-term investment. Remember that the primary purpose of your residence is to provide good, comfortable, safe, affordable housing. It's a valid question to ask about appreciation, but in the big scheme of things, for primary residences it shouldn't be the overriding factor. And, from personal experience, that Logan Circle condo worked out nicely from an investment standpoint. And my worst investment, from a dollars and cents standpoint, was a house on 5 acres in the country, just a mile from an elementary school with a great reputation. So, sure, appreciation does count. But so do a lot of other things.

Hope that helps.
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Thomas McGiv…, Agent, Farmingville, NY
Mon May 26, 2008
I am not a seattle resident and I know very little about the Seattle area. However, to generalize your question - you're raising a family. "Investing" in real estate is not the same as buying a home to live in and raise a family. Doing both mentally will only complicate matters. You can't go in and buy a home and live in it like it's an investment property. That's even hard to do if you're single and looking to buy and flip houses in 2 year time frames (great way to build wealth) - owner occupant and good for capital gains - great way to invest in real estate. Anyhow - my suggestion would be for you to buy where you and your family feel safe. Remember, you've got kids to care for and every parent wants the best for their kids and a safe neighborhood to live in is top on that list. If you AND YOUR WIFE feel safe in Bellevue, then go for it. If not, don't.
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Patrick Beri…, Agent, Seattle, WA
Fri May 23, 2008
This is a generalization, and there will be exceptions of course, but anything West of 405 is better than something comparable East of 405.
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Vera Brodsky, Agent, Bellevue, WA
Thu May 22, 2008
Schools are very important for resale value. If you are second-guessing the schools belonging to Phantom Lake, other buyers will do the same when you go to sell this house. Although Bellevue is a great investment, you still want to make sure to stay with Bellevue areas that tend to appreciate more then others. http://www.schoolmatters.com is a great independent school rating site if schools are your main concern.
Good luck!
Vera Brodsky
Remax Eastside Brokers
206 412 7792
Web Reference:  http://www.verabrodsky.com
0 votes
Rob Graham, Agent, Seattle, WA
Wed Mar 5, 2008

The previous responses did a great job of crunching the numbers for you, so I won't bore you with more numbers. You did mention however concern about the school districts. Here are two web sites to help you do a little more research. GreatSchools.net, and SchoolMatters.com. Both offer a wealth of information about individual schools and districts, including parent reviews.

Hope it helps.
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Anni Zilz, Agent, Mercer Island, WA
Fri Jan 25, 2008
You are well informed! Phantom Lake is what we call gentrification, the process of rebuilting a neighborhood. Depending on your price range all of the areas you have mentioned are in this process. This is great for a young family looking to get in and fix up. During the 1960s the Phantom Lake area was settled and built by Boeing engineers. Many of those people are retired now (or moving into assisted living) and have "deferred maintenance" on their homes. The elementary school is seeing a revival as young families move into the area and start to participate with the school. Of course the middle school and high school are award winning. If you take a drive around the neighborhood you will see homes that are freshly painted, new landscaping, new window treatments, and most of them have strollers on the porch. With quick access to trails, lake, parks, and the freeways, this is a great entry neighborhood. Kirkland is also great for the same reasons. If you can let me know your price range I can be more specific. Good luck.
0 votes
James Hsu, Agent, Bothell, WA
Fri Jan 25, 2008
Hi Liz, your question is a complex one. There's a bunch of things to consider when picking an area. If your primary criteria in picking an area is best potential in long term appreciation then my gut says Bellevue is a better bet based on ...what you mentioned...the build-out of downtown Bellevue. However, you need to consider a couple things. The transformation of downtown Bellevue is great for the city and the region, but maybe not so great to the surrounding communities. Now Lake Hills isn't an immediate surrounding neighborhood but it'll be affected as well. A flood of people into the region and all the issues that brings...more traffic, more cars, more people ...likely more crime. The other thing to consider is once the dozen or so cranes in downtown bellevue are done ... there's probably going to be a massive influx of housing inventory. I'm not clear when they'll all be done by, but obviously in the next couple years. If demand for housing in Bellevue at the time is really high, then it'll bring up values in downtown and all the surrounding areas. If housing demand is like now...flat or low, ...we'll have an overabundance of inventory and that'll keep prices flat or down. My point...just because it's transforming doesn't necessarily mean all rosy things.

2nd point... schools. All the areas you mentioned have great school districts. You've got Northshore SD feeding the South Bothell/North Kirkland areas, Lake Washington SD mostly Kirkland, and Bellevue SD. All are great and you aside from perhaps a few individual schools, you really can't go wrong with any of those three.

Okay with that being said, onto the fun stuff. Which area ..between Kirkland and Bellevue is the better long term investment? If I or anyone could predict these kinds of things...we'd be really rich right now. But I can't so I use the next best thing... track record. I don't have these figures down to the specific neighborhoods you mentioned, but this will give you an idea. If you want more detailed, ..contact me and I can provide.

Let's first look at Bellevue...East of 405 ..which Lake Hills/Phantom Lake would be a part of. The average quarterly growth in 2001 was 5.6%....meaning ...when averaged out...each quarter in 2001 grew about 5.6%. In 2002 it was 4.3%, 2003 it was 3.2%, 2004 it was 10.2%, 2005 it was 20.1%, 2006 it was 18.5%, and 2007 it was 8.73%. If you averaged all those out, ...you get the average growth per annum of 10.1%
Do the same thing with Kirkland, the average growth per annum is 11.3%. So roughly a 1% delta. The difference?...(oh by the way ..these figures are for single-family homes only ) ...since 2001, Bellevue has only had 3 years with average quarterly growths in double digits...with 2005 and 2006 as the standouts. Kirkland has had 5 years since 2001 in double digit average quarterly growths. .. Kirkland's growth basically has been more consistent.

So what's this all mean....history says Kirkland appreciates basically as good as Bellevue in the long run (a tick better actually) and it does so in a fairly consistent manner. (2001 - 1.3%, 2002 - 14.2%, 2003 - 2.52%, 2004 - 16.5%, 2005 - 11.0%, 2006 - 19.0%, 2007 - 14.6%). Bellevue on the other hand had two really great years and the rest were only so-so in comparison. So...historically, Bellevue is more volatile than Kirkland.

Last point... what time frame will Lake Hills/Phantom lake area improve? Belleuve is/has been doing improvements to the infrastructrue (mainly parks and roads) in those areas, but I hardly would call that an improvement. My belief is it takes re-zoning of an area to stimulate any kind of re-development. Otherwise, all you'll get is a house here and there being torn down to rebuild another house. I don't see big chunks of Lake Hills improving any time soon....they're all 50 year old homes ...some here and there have been remodeled fabulously, but you're still surrounded by 50 year old homes in various stages of care (or neglect ..depends on how you look at it).

Lastly, the number of sales in Bellevue has been slowly declining in the last 3 years while inventory has been dropping. In 2007, we saw an increase in inventory but still a decrease of overall activity. Not a good trend as that's trending toward a buyers market. Good for you now, ..not good for sellers now. Kirkland has been steady every year ...inventory vs. sales wise. Again proves ...Bellevue ..more volatile, ..Kirkland more stable. Both achieved relatively the same return over the same period of 7 or 8 years, just depends on how bumpy of a ride you like.

I have all this data in easier to read formats ... just contact me if you're interested.
Good luck, sorry for the novel length answer, and let me know if I can help.
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