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Mistakes to Avoid When Buying Rental Property

Man shaking hands with his Realtor® after buying rental property in Seattle
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Investing in a residential or commercial property can be a lucrative endeavor. However, don’t expect to become a real estate investment expert overnight. As with other business opportunities, it isn’t always as simple as it appears. It is possible to generate money by buying and selling real estate, but it requires knowledge, perseverance, and skill. To accomplish it successfully—and profitably—there are a lot of different elements and subtleties to consider. To help you make the process of buying rental property in Seattle, we’ve prepared a list of the most common mistakes you should avoid.

Avoid these mistakes when buying Seattle rental property

One of the best ways to make money and build wealth over the long term is to invest in rental property. If you run it well, it should help you make more money and grow your capital. However, before you start looking for a Seattle investment property, you need to be prepared well. Start by familiarizing yourself with the most common mistakes investment property buyers make and do your best to avoid them.

Couple sitting across the desk from their Realtor® and discussing buying rental property in Seattle.
Buying a rental property in Seattle is a big endeavor, so you must ensure you’re prepared well and have a good Realtor® on your side.

#1 Not doing a thorough research

Many real estate investors, especially first-timers, make the mistake of not doing enough research before committing to a rental property. Always keep in mind that a good investor should do their research on the property’s size and type to figure out what kind of tenant they want to rent to. This includes a study of the property’s local market trends and how likely it is to make money. The location of a property depends a lot on what the potential renters want.

Think about how nice the neighborhood is and what it has to offer. Make sure that all of the clauses in the contract meet your needs, and if you need help, talk to a good law firm that deals with property management. Also, before buying rental property in Seattle, make sure to estimate how much money it will make and compare that to other properties in the same area. To do this, you can use different cap calculators you can find online.

#2 Overestimating your budget

The golden rule when investing in real estate is when you set your budget, you need to make sure to stick to it. We are frequently seduced by the glamor and glamour of a more expensive residence that is “just a little bit more.” Before you know it, you’ve purchased a property that’s far too expensive for you, and you’re having trouble making the payments.

Again, remember why you’re investing, and don’t get emotionally invested and connected to a specific property. Making payments, you can’t afford will make your life more difficult and your financial situation worse. As a result, take care not to overextend yourself. So before you even start browsing Seattle properties online, take your time to analyze your finances thoroughly and set a realistic budget.

Two women sitting at a table, one of them taking notes while the other one is explaining something on her laptop.
You can always hire a financial advisor and get help with setting your budget.

Consider even the smallest expenses you expect to incur, even the ones not related to this purchase. For example, you might be moving to Seattle from a completely different part of Washington, and you’ll need to team up with trusted experts to help you with your long-distance move. Hiring movers will cost you and can make a significant dent in your budget. Or, if you’re buying a Seattle rental property from out of state, you need to factor in the costs of frequent flights you’ll need to take.

#3 Underestimating what’s involved in being a landlord

It’s not a secret that most people buy investment properties with the intention of profiting. Others may inherit them and believe they may profit from them. In either case, owners of investment properties frequently underestimate how involved they’ll need to be in order to make a profit. Therefore, before buying a Seattle rental property, make sure to understand how much effort and time you’ll need to dedicate to it.

First, in order to get a good lease price, there may be some physical labor you’ll need to do. Then, you’ll have to advertise the property (to the right people at the right price). You’ll also be responsible for maintaining the property and ensuring everything is in working order. Of course, you’ll also get to actually collect the rent. All of this takes time, as well as knowledge and abilities. It is not just a weekly requirement that you can handle within one hour.

#4 Not hiring a good Seattle Realtor®

Many people think that buying an investment property is the same as buying your family home. This makes them believe that handling this task on their own is a good idea. After all, how different and how difficult can it be? Well, that’s yet another mistake buyers in Seattle (and all over the US) tend to make.

Therefore, hiring an experienced Seattle Realtor® is a must, especially if you are investing from out of state. They will help you understand Seattle market trends and find a neighborhood where you’ll get the most of your investment. On top of that, they’ll help you stay within your budget by only showing you properties you can afford.

#5 Buying a property in a depreciating market

You might think it’s a good deal to buy an investment property in a place where prices are going down. Well, think again. When you invest in property, you hope its value will increase over time. So buying in a market where prices are decreasing isn’t always a good option. It can be just the opposite.

Two people sitting at a desk, working on their laptops and writing notes on a paper.
Your Seattle Realtor® will have market insights that are crucial for you to make the right purchase.

No amount of research or statistics can tell you for sure when prices will start going up again in that area. If there are fewer people in an area, there are fewer people who might want to buy or rent there. This usually means that prices will go down, too. Therefore, always look for investment properties where demand is growing faster than supply, as this tends to drive prices up.

Good luck buying rental property in Seattle!

We hope you enjoyed reading and, more importantly, that our article made buying rental property in Seattle that much easier for you. Remember—the key is in hiring experienced and knowledgeable professionals to assist you along the way. So, before anything, make sure to reach out to Seattle’s finest Realtors®, and you’ll ensure you have a smooth and successful real estate adventure!

Posted in: Investment Property Tagged: Real Estate Investments, Rental Market

Market Watch Q3 2016 – Downtown Seattle Condominiums

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The in-city housing market in our Emerald City has a split personality. Buy or rent, the message is the same – it’s going to cost more and more to live here. This fact is reigniting the debate between renting and homeownership and developers are listening.

Downtown Seattle is a very robust rental market, which has welcomed more than 12,500 new construction units since 2011. Despite this massive increase in supply, economist Brian O’Connor says rents have still grown by more than 40-percent over this term due to an imbalance with supply and demand. According to Zumper, Seattle is now in the top ten most expensive rental markets in the nation with a median price of $1,800 per month (half are more, half are less) for one-bedroom apartments. Average rents of newer apartment towers downtown can demand $3.50 to $4.25 per square foot, per month. So a 600 sq. ft. one bedroom could easily cost a renter $2,100 to more than $2,500 per month. That kind of monthly payment could service a healthy mortgage. Recently, Zillow stated that 22-percent of Seattle’s renters can afford to buy. They have the incomes and credit scores to own, so why don’t they?
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Posted in: Condos, Downtown, Market Update Tagged: Condominiums, Downtown Seattle, Homeownership, market, Market Watch, Rent vs. Buy, Rental Market

Nearly 22% of Seattle’s Renters are Qualified Buyers

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MARC STILES REPORTED IN A RECENT PUGET SOUND BUSINESS JOURNAL  FEATURE THAT “MORE THAN A FIFTH OF RENTERS IN SEATTLE COULD AFFORD TO BUY HOUSES,” A FACT THAT IS CONTRIBUTING TO THE SEEMINGLY EVER-RISING COST TO RENT IN SEATTLE.

Seattle’s rent is currently growing faster than any other city in the U.S., this according to the Seattle Times as June 2015 vs. June 2016 rent comparisons revealed a staggering 9.7% increase. What’s more, “rents are soaring so fast that June’s 1.1 percent monthly price gain in the Seattle area beat out the growth that Chicago and Washington, D.C., have seen in an entire year.”
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Posted in: Rental Market Tagged: BizJournal, dean jones, Millennials, NEXUS, NEXUS Seattle, PSBJ, Puget Sound Business Journal, Rental Market, seattle, Seattle Times, Zillow

Puget Sound Business Journal Says Nearly 22% of Seattle’s Renters are Qualified Homebuyers

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Marc Stiles reported in a recent Puget Sound Business Journal  feature that “More than a fifth of renters in Seattle could afford to buy houses,” a fact that is contributing to the seemingly ever-rising cost to rent in Seattle.

Seattle’s rent is currently growing faster than any other city in the U.S., this according to the Seattle Times as June 2015 vs. June 2016 rent comparisons revealed a staggering 9.7% increase. What’s more, “rents are soaring so fast that June’s 1.1 percent monthly price gain in the Seattle area beat out the growth that Chicago and Washington, D.C., have seen in an entire year.”
Continue reading…

Posted in: Rental Market, Seattle Tagged: BizJournals, dean jones, PSBJ, Puget Sound Business Journal, Rental Market, seattle, Seattle Real Estate, Seattle Times

Seattle Rentals Show Largest Increase in Nation

the colors of sunset grace the view from the patio of a newly constructed luxury home

A Zillow report released on July 22 shows Seattle rents rising faster than in any other U.S. city, increasing 9.7% from June 2015 to June 2016. Average monthly costs have risen nearly $500 over the last four years and have now exceeded the $2,000 mark for the first time in Seattle’s history. Although there has been nearly constant construction adding thousands of new units, the rental market continues to grow undeterred. In 2011, Seattle’s rent was about $300 more than the U.S. average; now, in 2016, it has more than doubled to $620 above the U.S. average.
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Posted in: Rental Market, Seattle Tagged: Monthly Rent, NEXUS, NEXUS Seattle, Rent, Rental Market, seattle, Seattle Times, seattlebydesign, Zillow

Is it Really Less Expensive to Own than Rent?

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Realogics Sotheby’s International Realty and Caliber Home Loans looked at average prices of newer condominiums and compared rents for comparable apartments. They found the total cost of ownership was effectively lower when factoring income tax deductions, not to mention the opportunity for capital appreciation. The research was performed as part of a recent think tank hosted by the Puget Sound Business Journal, which was published as a section called The Manhattanization of Seattle.

Continue reading…

Posted in: Financial, General Real Estate Information, Seattle, Uncategorized Tagged: #NoPlaceLikeOwn, dean jones, No Place Like Own, realogics sotheby's international realty, Rent vs. Buy, Rental Market

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