Tuesday, October 25, 2016

Transit Oriented Development

Given I just received my ballot for voting, I thought I’d revisit one of the measures affecting Seattle real estate that I’m most passionate about:  Sound Transit 3

Sound Transit has increased ridership and fandom with the opening of the Capitol Hill and Husky Stadium stations.  Personally, as someone who works in Northgate, I can’t wait for it open up here.  The convenience and speed of the light rail is amazing - already I can get to a Seahawks game within 10 minutes from the Husky Stadium station DURING RUSH HOUR, and don’t even have to deal with parking!!!   I don’t know who had the master plan, but the vote for Sound Transit’s next growth phase (Sound Transit 3) couldn’t come at a better time.  Sound Transit 3 will cost the average Puget Sound adult about $14 per month; will potentially expand light rail to Everett, Redmond, Issaquah, Ballard, West Seattle, and through to Tacoma; and will set the Tri-County area up for transit-success as the population is expected to grow by another 800,000 to 1.4m residents in the next 25 years.  But what isn’t being talked about as much is the rapid appreciation rates for homes located within a mile of each Sound Transit station.  Seattle based real estate firm Estately crunched the data, and the results were clear:  Homes near the Capitol Hill station are selling for $35,000 more than the rest of the neighborhood; Beacon Hill homes are selling for $61,000 more than the rest of the neighborhood; and you’d have to pay $88,000 more for a home near the Tukwila station! 

Yes, the typical Seattleite will have to pay $14 more per month in taxes, but consider this:  The median income for a Seattleite in 2014 was $71,273.  If that’s based on a 40 hour work-week, than that translates into a median hourly rate of $34.27 per hour.  Thus, if Sound Transit saves the average income-earner 24 minutes per month in commute time, then ST3 is a net-positive for the region.  I’m all for ST3, and if I could vote 1,000 times over to approve the plan, I would.  Not only does Sound Transit increase property values around the region, it straight up saves EVERYONE money in the long run by reducing the opportunity cost [of sitting in traffic].

Today's blog courtesy of Kyle Bergquist, Guild Mortgage

Any opposing points of view?

Happy Investing!

Monday, October 24, 2016

Changing Real Estate Market

According to real estate coach Mike Ferry, the housing market in North America is definitely changing. With the exception of strong markets in the metro Seattle and the greater Dallas-Fort Worth areas, the rest of the country has slowed down.

Ferry describes this as the "perfect storm" brewing: "The days on market is extending...Sellers are very unrealistic on pricing due to the four-year upward swing in the market...There are more FSBOs and Expireds, you have properties overpriced...Agents are not responding to the conditions of the market quickly enough and are overpricing properties...We have a possible interest rate hike [at the end of this year]...and then, just to make the whole thing more fun, we have a US Presidential election taking place..."

Canadian markets have been hit hard due to the change in energy prices affecting the Calgary-Edmonton market, the foreign investments tax in Vancouver, and overbuilding in Toronto.

While Ferry considers this a part of a normal real estate cycle, investors would be well-advised to prepare for this change.

Happy Investing!

Friday, October 21, 2016

Federal Reserve Rates

Have you heard references to the Federal Reserve or "the Fed" in the news? These reports usually pertain to the Fed's raising or lowering of interest rates. The impacts of a rate decision can vary. Here are a few things to remember:
  • The Fed sets target rates for bank-to-bank and Fed-to-bank loans.
  • The Fed does not directly control fixed mortgage rates. In fact, fixed mortgage rates can change well in advance as the market anticipates any adjustments.
  • The prime rate is directly influenced by Fed moves. This rate is often used as the benchmark for interest charged on credit cards, auto loans and Home Equity Lines of Credit (HELOCs).
There's talk that the Fed may raise rates before the end of the year. That may make this a good time to "lock in" a low rate on a purchase if you’re so inclined. Existing owners may want to consider refinancing or combining adjustable rate loans like HELOCs or even consumer debt into one low fixed rate. Consolidating debt is not for everyone, but talk with your local lender to decide what is best for you.
Happy Investing!

Today's blog courtesy of Cheryl Taylor, American Pacific Lending

Thursday, October 20, 2016

Home Maintenance for Women

Women across the country are working hard to make ends meet, often in unsafe homes and communities. More than one in   seven women and more than one in five children live in poverty. More than half of those children live in families headed by women. In 2015, 66% of the individuals served by Rebuilding Together Seattle were women, most of whom are the head of their household. Together we can increase the health and safety of these women's homes, and empower women to become changemakers in their communities.
On October 22, 2016, Rebuilding Together Seattle is launching our first-ever women-led She Builds community impact project in conjunction with Rebuilding Together's national office. Together with corporate sponsors and community partners, we will restore the homes of four women in the Allentown neighborhood of Tukwila and facilitating home repair workshops designed to train volunteers and empower homeowners to take their home maintenance needs into their own hands.

For more information, see http://www.rtseattle.org/she-builds

Happy Investing!

Wednesday, October 19, 2016

Anatomy of a Deal

Four years ago I bought a single family house in the Ballard neighborhood of Seattle for full list price on the Northwest Multiple List Service. The common wisdom is that nothing in Seattle cash flows (it is mostly an appreciation market), that there are no investor deals on the NWMLS market, and that one cannot make money paying full retail. All of these assumptions are false.

This house had four bedrooms/two baths on the two upper floors, and one bedroom/one bath in the attached mother-in-law unit in the basement. The elderly seller had previously rented out the entire house for $2300/month. She was having trouble selling this property and it sat on the market for over a month, primarily because all doors seemed to lead to the kitchen (4 entry points), and the main bath had a jetted walk-in tub - expensive to buy or to remove, but great if you are into hydro-therapy.

It was listed for $409,000 in 2012, which is what I offered in price. The Seller was willing to consider owner-financing, with $35,000 down on a seller note at 5% simple interest only, cash-out in five years. Monthly payments are $1558.33.

An inspection revealed a crack in the sewer line to the street, which the Seller repaired prior to closing.

My $35,000 down payment came from a private lender (whom I subsequently cashed out about a year later). My $12,000 real estate commission was used to pay closing costs, and make repairs. So basically, I was able to purchase this property with no mortgage, no credit check, and no money out-of-pocket.

I moved things around in the kitchen and was able to block off one of the entry points there; painted the interior; and remodeled the MIL to make a more habitable space for an on-site property manager.
I converted the new sunroom to a bedroom by adding a wardrobe closet. Then I furnished the common areas, and rented out each room on a monthly lease agreement. Currently I collect $4225 in monthly rents, so cash flow is approximately $2000/month.

My on-site property manager pays rent, but gets a discount for property manager duties.

Property management duties include collecting and depositing rent, showing vacant units to prospective tenants, doing move-in/move-out walk-through, advising owner of needed repairs or tenant problems, advising tenants of energy conservation efforts, ordering common household supplies, yard work, coordination with contractors as needed. I rarely go to the property or meet the tenants in person.
It is true that Seattle is a great appreciation market, and I conservatively estimate that equity in this property has gone up by at least 50% in the time I have owned it. So there is at least $200,000 of equity in a SFR property that cash flows $2000/month. That, folks, is a home run.
Such opportunities are not always easy to find, but they are out there. Keep looking, and use your creative acquisition tools to hit your own home run...
Happy Investing!

Tuesday, October 18, 2016

Seattle Appreciation

It seems I am asked at least once every day if the Seattle housing market will continue to appreciate.  My answer:  Yes, but not at the insane rate it has been for the last couple years.  Underlying fundamentals for why the Seattle housing market will continue to appreciate:  Because Supply of homes in Seattle cannot keep up with Demand, and Seattle’s overall affordability is still high relative to other large cities. 

The Puget Sound Business Journal summed things up pretty well in one of their recent articles.  Though Seattle isn’t going to be the fastest growing US city in the next 25 years, we’re right up there near the top.  Our expected population growth will not match Raleigh, Austin, or Orlando – but at 38% population growth over the next 25 years, demand for housing around here will continue to be strong for the foreseeable future.  Seattle/Tacoma/Everett is at about 3.8mresidents currently, however by 2040 the American City Business Journals estimates our population could be closer to 5.1m – That’s a 1.4m increase in people moving to Seattle.  Plain and simple, we may have some blips along the way, but overall this increased demand is going to continue supporting a strong housing market in the Puget Sound for years to come. 

Happy Investing!

Today's blog courtesy of Kyle Bergquist, Guild Mortgage

Monday, October 17, 2016

Work Hard Play Hard

I finished my first-ever Ragnar Relay Race around the Big Island of Hawaii, 15 miles total in the span of about 26 hours - triple the distance of any previous run I have done in quite some time. There were ten members on my relay team, and each had their own remarkable story of overcoming adversity.

Surprisingly, my muscles feel pretty good, no blisters or injuries, but did come home with a nasty chest cold. Nevertheless, it was worth every minute!

You get out of life what you put into it. Try moving outside your comfort zone, and go have an adventure!

Happy Investing!