The Seattle real estate market was recently named the hottest real estate market for 2018. With its high population growth, strong tech sector and diverse economy, this is the golden city for property investors looking for ways to make money in real estate!
The question worth asking is which of the two investment strategies (traditional or Airbnb) is the optimal rental strategy for the Seattle real estate market? For every real estate investor, this is a tough decision to make since there are lots of things to be taken into consideration for both rental strategies.
Before we take a look at both rental strategies for the Seattle real estate market, let’s talk a little about Seattle and what makes this city so attractive for real estate investing.
Why is the Seattle real estate market so hot?
1. Population growth
Real estate investors on the search for the next best place to invest always take into account the city’s population growth. If a city has a high rate of population growth, then for sure there is a high demand for real estate investment properties. It has been shown that the Seattle real estate market is expected to see 29,000 new residents each year for the next 5 coming years! Talk about a high demand for rental properties.
2. Job opportunities
One of the most obvious factors explaining the Seattle real estate market growth is the influx of job opportunities from major tech giants. The city is expected to see more than 50,000 new tech jobs from major companies like Microsoft, Facebook, Amazon, and Google. What does this mean for real estate? Well, high paid jobs mean that locals are receiving higher paid wages and, as a result, can afford to pay higher rents. Remember, high paid jobs increase the value of real estate!
3. Booming economy
Seattle’s economy – which used to be dominated by manufacturing industries – is currently being replaced by high-tech industries. The city’s unemployment rate is lower than it ever was due to the increased job growth which is expected to continue over the next ten years. A thriving economy is definitely a wow factor for real estate investors because you want more people moving into the cities that have stable jobs and high-paid salaries.
4. Low inventory
Why is low inventory a hot trend for the Seattle real estate market? Well when a city has a shortage in supply compared to the high demand, this means that property investors can make money in real estate without having too much competition to worry about. In the Seattle real estate market, the number of homes is much smaller than the number of people looking to buy. As a real estate investor, this is an opportunity for you to grab since hungry buyers will be willing to pay anything to get hold of a property.
5. Seattle tourism
The Emerald City is home to many wonderful attractions. Seattle is known for its diverse neighborhoods and stunning outdoor landscapes. For this reason, many tourists visit the city to experience all of its outdoor activities like kayaking, hiking, and skiing. Whether it is Seattle’s iconic Space Needle landmark, Mount Rainier or its world contribution to renowned coffee, Emerald City is exclusive and in a league of its own! Because of the high rate of tourists’ attraction, the Seattle real estate market is a very appealing market for those interested in Airbnb investments.
This brings us to our main question: which rental strategy is the optimal choice for the Seattle real estate market?
Seattle real estate market: traditional rental strategy
Let’s first take a look at some numbers taken from Mashvisor’s rental property calculator:
- Traditional Rental Income: $2,408
- Traditional Cash on Cash Return: 0.88%
Analyzing the data above, you can notice that investing in the Seattle real estate with the traditional, long-term investment strategy will not give you very high cash on cash return. However, this does not mean that you can’t find potential investment properties that would offer good cash on cash return. Using the property finder tool – one of our many real estate investment tools – we were able to locate the best-performing properties rented out traditionally.
Mashvisor’s property finder tool helps investors find the best-performing properties in their city/cities of choice using different filters to match their search criteria. Click here to use our Property Finder and find properties in a matter of minutes!
Seattle property #1:
- List Price: $460,000
- Traditional Cash on Cash Return: 2.95%
Seattle property #2:
- List Price: $519,00
- Traditional Cash on Cash Return: 2.68%
Seattle property #3:
- List Price: $435,000
- Traditional Cash on Cash Return: 2.61%
NOTE: If you want to see these properties and many more properties in Seattle in full detail, click here.
Seattle real estate market: Airbnb investment strategy
Let’s take a look at the second rental strategy: Airbnb rental strategy or short-term rental strategy.
- Airbnb Seattle Rental Income: $3,473
- Airbnb Seattle Cash on Cash Return: 1.72%
- Airbnb Seattle Cap Rate: 1.72
- Airbnb Seattle Occupancy Rate: 58.27%
It’s quite clear that the optimal rental strategy for the Seattle real estate market in 2018 is the short-term rental strategy! As you can see, this rental strategy gives real estate investors a high return on investment and high Airbnb rental income. Here are the top performing neighborhoods for the Seattle real estate market for Airbnb investments:
#1: Belltown, Seattle
- Median Property Price: $628,000
- Airbnb Rental Income: $3,810
- Airbnb Cash on Cash Return: 3.1%
- Airbnb Cap Rate: 3.1%
#2: North Queen Anne
- Median Property Price: $343,00
- Airbnb Rental Income: $2,338
- Airbnb Cash on Cash Return: 2.54%
- Airbnb Cap Rate: 2.54%
- Median Property Price: $956,333
- Airbnb Rental Income: $4,315
- Airbnb Cash on Cash Return: 2.35%
- Airbnb Cap Rate: 2.35%
- Median Property Price: $544,800
- Airbnb Rental Income: $2,576
- Airbnb Cash on Cash Return: 2.32%
- Airbnb Cap Rate: 2.32%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
So, now you should have a clear idea of what the Seattle real estate market looks like in 2018. However, just because the optimal rental strategy for this market is currently Airbnb rental strategy, it does not mean you should completely avoid investing in long-term rental properties. To ensure that you make a smart investment decision, here are a few things to keep in mind before you dive into the Seattle real estate market:
Things to consider before investing in the Seattle real estate market
Evaluate market and pricing trends
You want to invest in a rental property that financially makes sense. Your main goal should be to gain a high ROI regardless of how much you purchased the property for. You want to look at markets with low price-to-rent ratios so you can get a clear idea of how much rent to charge.
Also look for markets that have high occupancy rates. After all, the whole point of investing in rental properties is to generate positive cash flow by having tenants rent out your property.
Calculate all associated expenses
For most investment properties, you need at least a 20% down payment for financing your purchase. Ask yourself: do I have enough backup capital to cover any unexpected costs or losses? You also need to be prepared for fixed expenses like property management, insurance, taxes, etc.
Establish your financial goals
Real estate investing is not cheap. This is why you need to know what your financial goals are. Understand what metrics and figures affect the viability of your investment. Moreover, take metrics like ROI, cash on cash return and cap rate into consideration when evaluating your rental property.
Determine your income goals
Different real estate investors have different goals from others in the business. Despite what your goals are, you should have your income goals established. Always aim to get more from your property than what you put into buying it. According to the 1% Rule, your gross monthly income should be at least 1% of your property’s purchase price.
Learn how to spot high-potential locations
Always stay up-to-date on hot real estate markets and real estate trends. This will help you locate the best performing locations for buying an investment property. You can learn to spot these high-potential locations with various real estate investing tools or real estate investing websites.
Let Mashvsior be your starting point! With Mashvsior’s investment property calculator, heatmap tool, and property finder, you can locate the best-performing properties within minutes.
To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.