I am consider reliocating to Seattle from Atlanta

Asked by Scottish007, 30306 Thu Dec 13, 2007

I am a real estate investor. If you can, please tell me about the real estate investment environment in Seattle. Is Seattle a good market for the investor? How are rental rates holding up? Any guidance is truly appreciated!

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James Hsu, Agent, Bothell, WA
Thu Dec 13, 2007
Hi Scottish,
Let's first define what a good investor market is. Since you ask about rental rates, I'm assuming you're interested in investing in rental properties. To me, a good market to buy rentals is one where you can buy as low as possible and still have a strong market of renters. We didn't see that here in the last few years (as I suspect was the case around the country) as interest rates were crazy low and practically anyone with a pulse could get a loan.

For the most part, I believe the worst we'll see in the Seattle area is a stall or lull in the market. Price corrections for those sellers still thinking it's 2005. I don't think there will be a crash per say in this region. The job market is booming, Microsoft is hiring, other well paid tech jobs are coming here from Yahoo and Google (to name a couple). Microsoft has secured well over a million sqft of office space in Bellevue (city directly east of Seattle) and taken up a bunch of space in Seattle itself. People are moving here, cause the jobs are still here. Boeing is also doing well (as another example). With all these people still coming in, prices here can't possibly go into a free fall. The demand is still here... just most of them are waiting to see if we bottom out or not. Is it a good market to invest in? ..Sure...if you're in it for the long run. Prices are expensive for rental properties. Multi-family properties around the Univ. of Washington (the big college in the state ...sorry wazzu folks) rarely have a cap rate of 6 or higher, they're generally in the 4's and maybe 5's. The reason being property appreciation is so good.

Now for rental rates... I think rates are going to continually go up for at least the next year or two. The demand for condos have caused many apt buildings are being or have been converted to condos...thus displacing the renters. They gotta go somewhere. Also the tightening of the credit market also prevents some segment of people from buying ..and thus renting. If you like college students as your tenants...there's definitely good opportunities to be found in and around the university. There's lots of possibilities all over the region. Just kinda depends on what your target tenant is.
0 votes
Donald J. Le…, Other Pro, Tacoma, WA
Wed Dec 19, 2007
You know, what is funny is how knowledgeable someone can be when they are not an Attorney, but want to represent themselves in court and end up in jail. How about the guy who wanted to install his own electrical panel and burnt his house down...

You won't see that in real estate.... if you want to do it yourself fine, you won't be burning a house down or apt to cause anyone harm but yourself. If you take a look at the market and get scared or think that it will get worse…, act on your gut feelings and sit there and do nothing while the rest of us buy and sell. Say that Realtors are only out for the money and…. go it on your own….hey, it’s a free country last time I looked. For those savvy enough to ask for advice from a professional …and not begrudge the fact that the professional actually has the nerve to get paid for it, they move forward, even in hard times. I am working with investors right now, showing homes weekly.

I have actually bought 4 homes this year personally.... and I say that the water is fine, jump right in... my youngest son just bought another home on 3 acres for $169,000 near Puyallup, it was listed on the NWMLS. I am in Escrow with my 5th house (a Duplex) for the year but it won’t close till next month. Am I waiting for the price to get cheaper? NOPE. They may get a bit cheaper, they may not, but when you can pencil it out in your favor by a large margin then it just takes grit to go on and “get ‘er done”.

Believe in what we as Agents tell you or not…, its ok either way. If you don’t believe the rosy picture we paint, then just sit there, do nothing till the market swings back. But one thing to remember is this…., there is probably no one on this forum that will tell you what to do or recommend a course of action that they wouldn’t do or haven’t done themselves. If it was baloney the rest of us would call them on it in a minute anyway. We do police our own. You will see a bit of what looks like hype anytime sales are involved, with real estate this is no exception…but you must use a measure of self awareness and take a bit of risk. There was a sign on the bumper of a squad car in San Francisco in Height Ashbury in 1968 that I saw that was to the point…, it said: “If you don’t like cops, the next time you need help call a hippie!” – now that was funny.

The market is tough for some, LOTS of homes sitting on the MLS. But HEY… its just an opportunity for those who can see the forest through all the trees.

Best Regards,

By the way, side note for agent/friends: I am opening my own Brokerage next week just after xMass.
2 votes
James Hsu, Agent, Bothell, WA
Mon Dec 17, 2007
Sounds like the pessimism of the media has gotten to you Olaf. Redfin by far is not the authority in telling people how the market is doing. By their own admission (See Glen Kelman's interview on the Today Show a couple days ago) they're just a bunch of computer scientists.

What the public often sees is not what is really happening. Yah there's tons of houses that are overpriced and are being re-listed over and over again (which by the way is somewhat against NWMLS rules). Yah there's tons of homes dropping their prices. However, most people only see the homes that are still on the market. The homes that are actually selling don't show up on most consumer real estate websites once they've gone pending. So all you see are the homes that are just sitting and sitting. If you look at the inventory of homes closely, ..you'll see that the median prices of the homes that are selling is still creeping upwards.

I just looked at the Year-to-Date figures for single-family homes... King County median sale price is up 7.5% YTD compared to YTD figures for 2006. Snohomish county is up 8.1%. Pierce county is up 4.4%. Time on market has increased to an average of 55 days in King county and 66 days in Snohomish County.

The "correction" you so boldly proclaim that is underway is only applicable to those sellers who are refusing to believe the good 'ol days of 2005 are gone. The homes that are sitting, as you claim, for 6 months or more are the ones that are not priced properly for the current market. Plus...those are the only homes you see on the websites. The ones that are selling are dropping off the sites as they sell. Your blanket claim that the sky is falling is frankly irresponsible.

I do agree with you on the commuting to Olympia bit. However, nobody said anything about commuting from Olympia to Seattle. Rhonda was pointing out that Olympia may have good investment opportunities as opposed to Seattle.
2 votes
James Hsu, Agent, Bothell, WA
Wed Dec 19, 2007
Okay Pete. Fair enough. True, people buying and selling is what puts food on our tables and you should always take free information with a grain of salt (from anybody ...not just real estate agents). To counter that, I try to provide the people I work with with as much concrete evidence and data of what I say ..so people don't have to just take my word for it...the truth is in the numbers. Being a math major and having spent (wasted) so much of my student days doing proofs...it's basically carved in my brain that I need to provide as much proof for everything now.

Anyway, ..here's your North Seattle figures. Our NWMLS defines North Seattle's borders as ..I-5 to the West, Lake Washington to the East, NE 145th St (lake city) to the North and Portage Bay/Union Bay (roughly 520) to the South.

In terms of market activity (how many listings have come up), ..2007 and 2006 are really close.
Year-to Date (which this report I'm quoting off of is till end of November) for 2007 has seen 1851 listings in north seattle. Same period for 2006 had 1822. Pretty darn close. November 2007 has exactly 100 more listings on the market than November 2006 ...that's the languishing you see ...tons and tons more homes sitting. Median price for just the month of November 2007 is 496,000 while November 2006 was 499,950. So a small dip...about 0.8% drop. However, for the year, median price is $525,000 while last year it was $499,997.

Average time on market has increased by 10 days when comparing november 2007 to november 2006 (63 vs 53 days) ... and has increased a week when looking at Year-to-date figures.

Please tell me what site you use that does show pending properties. I just pulled up a pending property that's been pending for a month now near my house and checked it against windermere.com, johnlscott.com, cbbain.com, redfin.com, ziprealty.com, ....and none of them could show me the pending property. You're not confusing STI and pending are you? STI will show on consumer sites. Pending does not. That's my understanding and belief (until proven wrong).

Properties that are perpetually on the market and then end up being rented are quite often ones that the seller is hoping to get a huge price for. If they can't get it, they'll put a stop-gap solution in place ...renting..and wait out the market till they can get what they want. I'm not recommending this approach ..it works for some ..and not for others. Too many sellers are off their rocker in terms of what they think their house "deserves." One house in my general area sold in May for $475k. The exact same floorplan house came on the market 2 months later wanting $585K. ..$110K more for the exact same house in relatively same condition on the same street. Sorry..there's nothing you can do to that house short of burying $100k in cash in the backyard to make the latter house worth that much more. That house has been re-listed and price dropped over and over and ....as you see often ...it's now for rent. Seller apparently refuses to believe or accept that the market value is lower than their price. Then you have the more reasonable sellers who know they can't keep assuming their property is appreciating at 20% a year and they price their house accordingly and they sell.

I'm not saying by any means that the market is happy, rosy...it's not. However it's not the doomsday scenario that many in the media like to portray. It's not the mess that most parts of the country is experiencing. Our area in general has definitely slowed down ..it's taking a breather and the crazy sellers out there that refuse to accept this fact will suffer.
1 vote
Steve Hobson, Agent, Bonney Lake, WA
Mon Apr 7, 2008
As an investor myself with 6 properties, your best bet is to look asouth in Pierce County (Tacoma Area) .Prices are high in all of King County (Seattle Area). Unless you have a $200,000-$300,000 to put down, look south for a better option for a positive cash flow. Our Washington economy is strong!! Yes, we do have a buyer's market due to high inventory, and yes there are pre-foreclosures and bank owned properties. Most of them in the $300,000 range or below. Rent for a 3 bedroom, 2 bath home will range from $1195 - $1500/month depending on size and condition. You work the figures for the cash flow and how much to put down. Rental properties are strong. Rents have been going up a bit due to the increase in property taxes and new demand ,now that some folks are unable to purchase (No money). I have not had much rental turnover myself. I keep my properties in good shape attracting good renters. Good luck to you. You can search for properties on my website as well.
/s/ Steve
0 votes
Pete, Home Buyer, Seattle, WA
Wed Dec 19, 2007
I frequent multiple sites that not only list current properties but also pending properties.

I have been focusing on the North Seattle area and am seeing properties languish. Properties have been sitting for so long that the MLS listings have expired. The properties are then relisted with a reduced price. After months of this many of these properties are appearing on sites such as Craigslist as FOR RENT.

I don't know that I would phrase it the same way that Olaf did but the market is not as rosy as these Real Estate Pro's would proclaim. Just remember that these guys make money when you buy or sell so take what they say with a grain of salt and look at the market for yourself.
0 votes
Donald J. Le…, Other Pro, Tacoma, WA
Mon Dec 17, 2007
Did someone say that Seattle and Puget Sound real estate is way overvalued? Some people may hope so, with thoughts of getting a killer deal... then, once you bought your killer deal... where do you want your value to go when it comes time to resell? - I thought so.

Thanks to our Pacific Rim location and our deep natural harbor, a spectacular level of deep-draft tonnage passes through our ports every day. With the continued explosion of trade, and Panama's inability to finance an increase in canal capacity, the demand on northwestern ports will continue to grow.

While this is mainly a transportation infrastructure problem, it clearly has major ramifications for real estate. For example, due to terrorism's disruptions of global just-in-time manufacturing and the seasonal nature of trade, the need for additional warehousing and other infrastructure space has become critical. We are already seeing significant demand for additional warehousing space in our region. Where are we going to accommodate this growing demand? Thanks John; http://www.djc.com/news/re/11172346.html

Four major demographic factors are causing population growth to be a significant issue for Puget Sound:
*Enhanced trans-Pacific and Latin American immigration
*The huge baby-boom cohort coupled with our growing aging population
*A rapid rise in single-person households, particularly in urban areas
*The nation's population is shifting toward the coasts

"Real estate and infrastructure has not kept pace with this population growth. Witness the demand for housing and our overtaxed highways, which are just the tip of the population iceberg. When you couple an ever-increasing population with a real estate supply that is constrained both by geography and by regulation, it becomes obvious that we will require a vastly different decision making paradigm and a greater level of creativity than we've exhibited in the past....". - Business Journal quote.

Anyway.... I personally bought 4 homes this year. My two sons bought several homes each this year....so, just wait and see if the market really goes down or, buy now and when it goes up as it always does, you can prosper with the rest of us. :)

0 votes
Olaf, Home Buyer, Seattle, WA
Mon Dec 17, 2007
Oh man, don't get suckered. The real estate industry in this area is hungry for new patsies, because everyone else has finally figured out that property here is way overvalued, and there's a growing rush for the exits. (Just check out Redfin.com, which has a more complete view of the market.) Houses now sit for six months or more, seller re-list and re-list, and asking prices are dropping. What was $600 K is now $500, and the "correction" has just begun.
Also: Don't let anyone tell you people "commute to work" from Olympia to Seattle. That's a ninety-minute drive when rush hour goes smoothly -- which it rarely does. The transportation infrastructure in this region is collapsing under its own weight, and anybody who has to commute is living a miserable life.
0 votes
Rhonda Olnick, Agent, Olympia, WA
Fri Dec 14, 2007
Hi Scottish - I actually work in Olympia, which is 60 miles south of Seattle. If you're looking to buy a single family residence for a rental it really isn't a good time to buy unless you have a large down payment. If you put down a sizable amount you will have some cash flow. Our market here for single family homes is about $1.00 a square foot i.e. a 1,000 square foot house will rent for $1,000. Right now you can get a decent 1,000 sqft house in our area for around $200k. If you're an investor I'm sure you can do the math and figure out that the numbers won't pencil in the short term, but if you hold on to the property you will realize a gain. Our market is still appreciating at 8-10% per year. Olympia has a very strong rental market with as little as a 1% vacancy rate. I can speak from experience as I have a duplex here in town. We had our first vacancy in four years this summer. I put an ad in the paper for rent and had over 10 calls per day! I had several well-qualified applicants. It was tough to choose and I really wish I had a couple other places vacant and ready to rent.

I know Olympia is not Seattle, but it's cheaper here and lots of people live here and drive there to work.

Good luck!

Good luck!
0 votes
Danny Speagle, , Denver, CO
Fri Dec 14, 2007
According to one of my investor clients, who lives and invests in Atlanta, the market is tight. You should consider Denver. The deals here are unbelievable. As a real estate broker that specializes in assisting real estate investors in finding the absolute best deals, I know. I find them everyday I go out. I am talking about foreclosed single family homes selling at 60% of the actual value.

Danny Speagle
Web Reference:  http://www.SpeagleGroup.com
0 votes
Donald J. Le…, Other Pro, Tacoma, WA
Thu Dec 13, 2007
Here is my 2 cents worth.

Samuel is right on when he said, "Seattle is no longer a place to come looking for a "quick gain" from your investments." James also had some great in depth details about Seattle. My experience has been that some Seattle area investors, who have been around and are savvy, are looking just South of Seattle and areas that commuters will travel 30-45 minutes from to get into the city...for better deals. They are now building a new commuter light rail system to go to outlying areas.

James is also right about the job market here. Just remember that… 1. the seller pays the RE fee and… 2. not all Agents have personally flipped a house, nor are familiar with the rental market in particular and some have not dealt with investment strategy on a personal basis, but most are of course glad to help a client do so. Sharpen your pencil and pick a good agent.

Have a great experience in the Emerald City and beyond...!
0 votes
Samuel Hilbe…, , Woodinville, WA
Thu Dec 13, 2007
Seattle rental rates have really boomed recently...especially with the large number of condo conversions that have taken place in the past year. Here in Seattle, we continue to buck many of the national trends of a downturning market.

With that said...Seattle is no longer a place to come looking for a "quick gain" from your investments. In this market as long as you are knowledgeable in where and what you are buying you can still find several good investments and can easily rent them out.

I personally feel bad for renters as it is now extremely difficult to find affordable rental properties as rents have sky rocketed...thankfully if a buyer can qualify this is a much better time to be buying than renting...now to just find more qualified buyers...
Web Reference:  http://www.agentsamuel.com
0 votes
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