Understanding Rental Yield: Is Your Seattle Investment Property Actually Profitable?

Seattle-specific rental yield analysis with real calculations, cap rates, operating expenses, and cash flow examples for Washington investors.

Tags:rental-yield, investment, washington, seattle, real-estate, cash-flow, cap-rate, property-analysis
Share this article

You're looking at a $650,000 duplex in Beacon Hill. The seller says it generates $4,000 a month in rent. Sounds like a great investment, right?

Not so fast. That $48,000 annual rent doesn't tell you whether this property will actually make money. You need to understand rental yield, and in Seattle's market, the numbers might surprise you.

In this article, you'll learn:

  • How to calculate gross and net rental yield
  • What cap rates mean and why Seattle's are lower than national averages
  • Operating expenses that eat into your rental income
  • When rental properties make sense vs pure appreciation plays
  • Real examples from Greater Seattle neighborhoods

This article is for you if: You're considering buying a property to rent out, want to understand if your current rental is a good investment, or are evaluating whether to sell or keep a home when you move.

Table of Contents

What Is Rental Yield?

Rental yield measures how much income a property generates relative to its cost. Think of it like the interest rate on a savings account, but for real estate.

There are two types:

Gross rental yield = (Annual rent / Property price) × 100

Net rental yield = (Annual rent - Operating expenses) / Property price × 100

The difference between these two numbers is huge, and it's where many new investors get tripped up.

Seattle's Rental Yield Reality

Let's look at a typical Seattle investment property using Q4 2024 numbers.

Property: 3-bedroom house in Rainier Valley

  • Purchase price: $650,000
  • Monthly rent: $3,200
  • Annual rent: $38,400

Gross rental yield: $38,400 / $650,000 = 5.9%

That looks decent. But now let's calculate the real return.

Annual operating expenses:

  • Property taxes (1% in King County): $6,500
  • Insurance: $1,800
  • Maintenance and repairs (1-2% of value): $9,750
  • Property management (8-10% of rent): $3,840
  • Vacancy (5% assumption): $1,920
  • HOA fees (if applicable): $0
  • Utilities (if owner pays): $0
  • Total expenses: $23,810

Net rental yield: ($38,400 - $23,810) / $650,000 = 2.2%

That 5.9% gross yield just became 2.2% net. And we haven't even factored in mortgage payments yet.

Understanding Cap Rates

Cap rate (capitalization rate) is another way to measure rental yield. It's the net operating income divided by property value, and it's the standard metric investors use to compare properties.

Cap rate = Net operating income / Property value

Using our Rainier Valley example:

  • Net operating income: $14,590 ($38,400 rent - $23,810 expenses)
  • Cap rate: $14,590 / $650,000 = 2.2%

Seattle cap rates by area (2024 estimates):

  • Seattle proper: 3-4%
  • Eastside (Bellevue, Redmond): 2.5-3.5%
  • South King County (Renton, Kent): 4-5%
  • Snohomish County (Everett, Lynnwood): 4-5.5%

Compare this to national averages of 6-8%, and you can see why Seattle is considered a low-yield market.

Why Seattle Cap Rates Are So Low

If the returns are so low, why do people invest in Seattle real estate?

Appreciation Expectations

Seattle home values have historically appreciated 4-6% annually. Investors accept lower rental yields because they expect property values to increase significantly over time.

Example: You buy that $650,000 house with a 2.2% cap rate. After 10 years:

  • Rental income (net): $145,900
  • Appreciation at 5% annually: $408,000
  • Total return: $553,900 (85% return on $650,000)

The appreciation dwarfs the rental income.

Strong Rental Demand

Seattle's tech industry creates consistent demand for rentals. Low vacancy rates (typically 3-5%) mean reliable income even if yields are modest.

Market Stability

Seattle has weathered economic downturns better than many markets. The 2008 crash saw smaller price drops here than in most major cities.

Limited Supply

Seattle's geography (water on three sides) and restrictive zoning limit new construction, supporting long-term value growth.

Breaking Down Operating Expenses

Let's look at each expense category in detail, because this is where investors often underestimate costs.

Property Taxes

King County averages 1% of assessed value annually. Snohomish County is slightly lower at 0.9%.

Important: Assessed value can increase faster than market value in hot markets. Budget for 3-5% annual increases.

Example: $650,000 home

  • Year 1 taxes: $6,500
  • Year 5 taxes: $7,500-7,800

Insurance

Homeowners insurance for rental properties costs more than owner-occupied policies.

Seattle area typical costs:

  • Single-family home: $1,500-2,000/year
  • Condo (HO-6): $500-800/year
  • Duplex/triplex: $2,000-3,000/year

Add earthquake insurance ($800-1,500/year) and landlord liability coverage ($200-400/year) for full protection.

Maintenance and Repairs

The 1-2% rule is a good starting point, but actual costs vary by property age and condition.

Annual maintenance budget for $650,000 property:

  • Conservative: $6,500 (1%)
  • Realistic: $9,750 (1.5%)
  • Older home: $13,000 (2%)

Common Seattle-specific maintenance:

  • Gutter cleaning: $200-300 (2x/year)
  • Moss treatment: $300-500/year
  • Sewer line inspection: $300-500 every 3-5 years
  • Moisture issues: $500-5,000 depending on severity

Property Management

If you hire a property manager (highly recommended for out-of-area owners), expect to pay:

  • 8-10% of monthly rent
  • First month's rent for new tenant placement
  • Markup on maintenance (10-20%)

Example: $3,200/month rent

  • Monthly management: $320
  • Annual cost: $3,840
  • New tenant placement: $3,200 (every 2-3 years)

Vacancy

Even in Seattle's tight market, plan for vacancy. Turnover happens when tenants move, and you'll need time for cleaning, repairs, and finding new tenants.

Realistic vacancy assumptions:

  • Excellent location, well-maintained: 3-5%
  • Average property: 5-7%
  • Older property or less desirable area: 7-10%

Example: $3,200/month rent with 5% vacancy

  • Lost rent: $1,920/year
  • Plus turnover costs: $1,500-3,000

Utilities

Who pays utilities affects your net yield significantly.

If tenant pays (most common): $0 cost to you

If owner pays (some older leases):

  • Water/sewer: $100-150/month
  • Garbage: $50-80/month
  • Gas/electric (if not separately metered): $150-250/month
  • Total: $3,600-5,760/year

Cash-on-Cash Return: The Real Number

Cap rate doesn't account for financing. If you're using a mortgage, cash-on-cash return is what matters.

Cash-on-cash return = Annual cash flow / Total cash invested

Let's revisit our $650,000 Rainier Valley house with financing:

Purchase costs:

  • Down payment (20%): $130,000
  • Closing costs: $13,000
  • Initial repairs: $5,000
  • Total cash invested: $148,000

Annual cash flow:

  • Rental income: $38,400
  • Operating expenses: -$23,810
  • Mortgage payment (6.5%, 30-year on $520,000): -$39,500
  • Annual cash flow: -$24,910

Cash-on-cash return: -$24,910 / $148,000 = -16.8%

Wait, negative return? Yes. This is common in Seattle.

When Negative Cash Flow Makes Sense

Many Seattle investors accept negative cash flow because they're betting on appreciation.

The appreciation play:

  • Annual cash flow: -$24,910
  • Annual appreciation (5%): $32,500
  • Net annual gain: $7,590

Plus, you're building equity through mortgage paydown (roughly $6,000 in year one).

Total annual benefit:

  • Appreciation: $32,500
  • Equity buildup: $6,000
  • Tax benefits: $5,000-8,000 (consult tax professional)
  • Cash flow: -$24,910
  • Net: $18,590-21,590

That's a 12.5-14.6% return on your $148,000 investment, even with negative cash flow.

Important: This strategy requires:

  • Stable income to cover negative cash flow
  • Long-term holding period (7-10+ years)
  • Confidence in Seattle market appreciation
  • Cash reserves for unexpected expenses

Where to Find Positive Cash Flow

So if most Seattle properties have negative cash flow, where can you find properties that actually make money each month?

They exist, but you'll need to look outside Seattle proper or consider different property types.

South King County:

  • Renton, Kent, Auburn, Federal Way
  • Lower purchase prices ($500,000-600,000)
  • Similar rents to Seattle ($2,800-3,200)
  • Cap rates: 4-5%

Snohomish County:

  • Everett, Lynnwood, Marysville
  • Purchase prices: $550,000-650,000
  • Rents: $2,500-3,000
  • Cap rates: 4-5.5%

Multi-family properties:

  • Duplexes, triplexes, fourplexes
  • Higher total rent relative to purchase price
  • Better economies of scale on expenses

Example: $700,000 duplex in Everett

  • Total monthly rent: $4,400 ($2,200 per unit)
  • Annual rent: $52,800
  • Operating expenses: $26,400 (50% of rent)
  • Net operating income: $26,400
  • Cap rate: 3.8%
  • Mortgage payment (20% down): -$42,000
  • Annual cash flow: -$15,600

Still negative, but closer to break-even than Seattle proper.

Running Your Own Numbers

Use this framework to evaluate any potential rental property:

Step 1: Estimate Rental Income

That $148,000 you invested could be earning returns elsewhere.

Stock market comparison:

  • $148,000 invested in S&P 500 index fund
  • Historical average return: 10% annually
  • After 10 years: $384,000
  • Gain: $236,000

Your rental property (from earlier example):

  • Total benefit over 10 years: $185,900-215,900
  • Gain: $185,900-215,900

The rental property might actually underperform a simple index fund, especially when you factor in:

  • Time spent managing property (worth $50-100/hour)
  • Stress and hassle of being a landlord
  • Liquidity (can't sell half your property if you need cash)

When rental properties win:

  • You use leverage effectively (appreciation on full $650K, not just your $148K)
  • Tax benefits are substantial for your situation
  • You enjoy real estate investing and don't mind the work
  • Market appreciation exceeds stock market returns

Problem Tenants: The Nightmare Scenario

A single bad tenant can wipe out years of profits.

Real Seattle example (anonymized):

  • Tenant stopped paying rent after 6 months
  • Eviction process took 4 months (longer during COVID)
  • Lost rent: $12,800 (4 months × $3,200)
  • Legal fees: $3,500
  • Property damage: $8,000 (beyond security deposit)
  • Cleaning and repairs: $2,500
  • Total loss: $26,800

That's more than 3 years of net operating income ($14,590/year) wiped out by one bad tenant.

How to protect yourself:

  • Rigorous tenant screening (credit, employment, references)
  • Require 3x rent in monthly income
  • Check previous landlord references (not just current)
  • Consider rent guarantee insurance ($50-100/month)
  • Build larger cash reserves (12 months, not 6)

Warning signs to avoid:

  • Tenant pressuring you to skip screening
  • Offering to pay several months upfront (red flag)
  • Can't provide verifiable employment
  • Previous evictions or landlord disputes

Extended Vacancy: When the Market Turns

Your 5% vacancy assumption might be optimistic during downturns.

Seattle 2022-2023 example:

  • Tech layoffs increased rental inventory
  • Some properties sat vacant 3-6 months
  • Landlords offered 1-2 months free rent to attract tenants
  • Effective vacancy rate: 15-20% in some buildings

Impact on our $650K property:

  • Normal vacancy (5%): $1,920/year
  • Downturn vacancy (15%): $5,760/year
  • Additional loss: $3,840/year
  • Plus concessions (1 month free): $3,200
  • Total impact: $7,040/year

This turns your $14,590 NOI into $7,550 NOI, cutting your return in half.

Protection strategies:

  • Price competitively (don't be the most expensive)
  • Keep property in excellent condition
  • Be flexible on lease terms during downturns
  • Market aggressively (professional photos, multiple platforms)
  • Consider offering small incentives rather than large rent reductions

Major Repairs: The Budget Killers

Your 1.5% maintenance budget assumes normal wear and tear. Major issues can blow through that.

Real Seattle scenarios:

Sewer line failure:

  • Cost: $15,000-25,000
  • Common in older Seattle homes
  • Not covered by insurance
  • Must be fixed immediately

Foundation issues:

  • Cost: $20,000-50,000
  • Seattle's soil and moisture create problems
  • Can take months to repair
  • May require tenants to vacate

Roof replacement (unexpected):

  • Cost: $15,000-30,000
  • Seattle's rain accelerates wear
  • Can't wait if leaking
  • May discover additional damage

One major repair can consume 2-3 years of net operating income.

How to prepare:

  • Get thorough pre-purchase inspection ($500-800)
  • Sewer scope inspection ($300-500)
  • Budget 2% for older properties (not 1.5%)
  • Maintain CapEx reserve of $20,000-30,000
  • Consider home warranty for major systems ($500-800/year)

Market Timing Risk: Buying at the Peak

Seattle's appreciation isn't guaranteed. Buying at the wrong time can be costly.

2022 peak buyer example:

  • Bought at $750,000 (peak)
  • 2023 value dropped to $675,000
  • Lost $75,000 in equity
  • Now underwater if they put less than 10% down
  • Can't refinance or sell without loss

How to avoid:

  • Don't buy when everyone is buying (FOMO)
  • Look for signs of overheating (bidding wars, waived contingencies)
  • Be patient during hot markets
  • Consider waiting for inventory to increase
  • Don't assume appreciation will bail you out

Regulatory Risk: Laws Can Change

Washington's landlord-tenant laws can change, affecting your returns.

Recent changes that hurt landlords:

  • Just cause eviction requirements (harder to remove tenants)
  • Longer notice periods for rent increases
  • Restrictions on security deposits
  • Required relocation assistance in some cities

Seattle-specific risks:

  • Potential rent control discussions
  • Short-term rental restrictions
  • Stricter habitability requirements
  • Higher costs for evictions

Protection:

  • Stay informed about legislative changes
  • Join landlord associations
  • Budget for higher legal costs
  • Consider properties in less regulated areas

The Real Math: Stress-Testing Your Investment

Let's recalculate our $650K property with realistic risks:

Optimistic scenario (what we showed earlier):

  • Annual return: $18,590-21,590 (12.5-14.6%)

Realistic scenario (accounting for risks):

  • Appreciation: $32,500 (5%)
  • Equity buildup: $6,000
  • Tax benefits: $6,000
  • Cash flow: -$24,910
  • Bad tenant (every 5 years): -$5,360/year average
  • Extended vacancy (every 3 years): -$2,350/year average
  • Major repair (every 7 years): -$3,000/year average
  • Net: $8,880/year (6% return on $148K)

Pessimistic scenario (downturn):

  • Appreciation: $0 (flat market)
  • Equity buildup: $6,000
  • Tax benefits: $6,000
  • Cash flow: -$24,910
  • Bad tenant: -$5,360
  • Extended vacancy: -$5,000
  • Major repair: -$5,000
  • Net: -$28,270/year (-19% return)

The takeaway: Rental properties can work, but only if:

  • You have substantial cash reserves ($50K+)
  • You can handle negative returns for several years
  • You're truly committed to 10+ year hold
  • You have stable income to cover losses
  • You're prepared for worst-case scenarios

When Rental Properties Make Sense (And When They Don't)

After seeing all those risks, you might be wondering: should anyone invest in Seattle rentals?

The answer: it depends on your situation.

Good scenarios for Seattle rental properties:

  1. You're moving but want to keep your home

    • Already own the property (no new down payment needed)
    • Know the property's condition and history
    • Familiar with the neighborhood
    • Can cover negative cash flow from your new location

  2. You have substantial cash reserves

    • Can handle 6-12 months of negative cash flow ($12,000-30,000)
    • Have emergency fund for major repairs ($20,000-30,000)
    • Won't be stressed by vacancy periods or problem tenants

  3. You're committed to holding 10+ years

    • Time for appreciation to compound
    • Mortgage balance decreases significantly
    • Rents increase over time
    • Can weather market downturns

  4. You can buy below market value

    • Fixer-upper with forced appreciation potential
    • Estate sale or motivated seller
    • Off-market deal through connections

  5. You want portfolio diversification

    • Real estate as part of broader investment strategy
    • Tax benefits complement other income
    • Hedge against stock market volatility

When you should NOT invest in Seattle rentals:

  1. You need immediate cash flow

    • Seattle's low cap rates won't provide this
    • Consider higher-yield markets (Midwest, South) instead

  2. You can't afford to lose money for 3-5 years

    • Most Seattle properties lose $1,000-2,000/month
    • That's $36,000-72,000 over 3 years
    • Be honest: can you really handle that?

  3. You're planning to sell within 5 years

    • Transaction costs eat up gains (6-8% = $40,000-50,000)
    • Not enough time for appreciation to offset costs
    • This is NOT a liquid investment

  4. You don't have time or interest in management

    • Property management costs 8-10% (reduces returns further)
    • Being a landlord requires work and stress tolerance
    • 2am emergency calls are real

  5. You're buying at market peak

    • Risk of appreciation slowing or reversing
    • Could face negative equity if market corrects
    • Wait for better buying conditions

Short-Term vs Long-Term Rental Strategies

Understanding the differences between rental strategies helps you choose the approach that best aligns with your investment goals.

Long-Term Rentals

Benefits:

  • Stable, predictable income
  • Lower management intensity
  • Lower vacancy rates
  • Reduced marketing costs
  • More predictable tenant behavior

Considerations:

  • Lower gross yields due to market rent limitations
  • Limited flexibility for adjusting rates
  • Longer lease commitments

Best for: Investors seeking stable income with minimal management, properties in residential neighborhoods, and markets with strong long-term rental demand.

Short-Term Rentals

Benefits:

  • Higher gross yields (potentially 2-3x long-term rates)
  • Flexibility to adjust pricing based on demand
  • Ability to use property personally
  • Higher per-night rates

Challenges:

  • More intensive management required
  • Higher marketing and operational costs
  • More variable occupancy rates
  • Regulatory restrictions in some areas
  • Higher utility and maintenance costs

Best for: Properties in tourist areas, near universities or business districts, and investors willing to handle more active management.

Hybrid Strategies

Some investors combine both approaches:

  • Long-term rental with option to convert during peak seasons
  • Corporate housing (medium-term furnished rentals)
  • Seasonal adjustments based on market demand

Seattle-specific considerations:

  • Check local regulations (some areas restrict short-term rentals)
  • Consider proximity to attractions, universities, or business centers
  • Evaluate seasonal demand patterns
  • Factor in higher operating costs for short-term rentals

Capital Expenditures and Reserve Planning

Capital expenditures (CapEx) represent significant costs that affect long-term returns and should be carefully planned.

Major System Replacements

Typical lifespans and costs:

  • Roof: 20-30 years, $15,000-30,000
  • HVAC: 15-20 years, $8,000-15,000
  • Water heater: 10-15 years, $1,500-3,000
  • Appliances: 10-15 years, $500-2,000 each
  • Exterior paint: 7-10 years, $5,000-15,000

Planning approach:

  • Create replacement schedule based on property age
  • Budget 10-15% of gross rent for CapEx reserves
  • Inspect systems regularly to anticipate needs
  • Plan for multiple replacements in older properties

Property Improvements

High-ROI improvements:

  • Kitchen updates: $10,000-30,000 (can increase rent 10-15%)
  • Bathroom renovations: $5,000-15,000 (can increase rent 5-10%)
  • Energy-efficient upgrades: $3,000-10,000 (reduces operating costs)
  • Curb appeal: $2,000-5,000 (attracts better tenants)

Lower-ROI improvements:

  • High-end finishes (may not justify rent increase)
  • Over-improvements for neighborhood
  • Purely cosmetic changes without functional benefit

Reserve Fund Management

Recommended reserves:

  • Emergency fund: 3-6 months of expenses
  • CapEx reserve: 10-15% of gross rent annually
  • Vacancy reserve: 2-3 months of rent

Example for $650,000 property:

  • Monthly rent: $3,200
  • Annual gross rent: $38,400
  • CapEx reserve (12%): $4,600/year
  • Emergency fund: $15,000-20,000
  • Vacancy reserve: $6,400-9,600

Running Your Own Numbers

Use this framework to evaluate any potential rental property:

Step 1: Estimate Rental Income

  • Check Zillow, Craigslist, Apartments.com for comparable rentals
  • Look at properties within 0.5 miles, similar size/condition
  • Use conservative estimate (lower end of range)
  • Consider seasonal variations

Step 2: Calculate Operating Expenses

  • Property taxes: Check county assessor website
  • Insurance: Get actual quotes
  • Maintenance: 1-2% of property value
  • Property management: 8-10% of rent (if applicable)
  • Vacancy: 5-7% of rent
  • Utilities: $0 if tenant pays, actual costs if owner pays
  • HOA: Check HOA documents
  • CapEx reserve: 10-15% of gross rent

Step 3: Calculate Net Operating Income

Annual rent - Operating expenses = NOI

Step 4: Calculate Cap Rate

NOI / Purchase price = Cap rate

Step 5: Calculate Cash-on-Cash Return (if financing)

  • Determine down payment and closing costs
  • Calculate monthly mortgage payment
  • Annual cash flow = NOI - Annual mortgage payments
  • Cash-on-cash return = Annual cash flow / Total cash invested

Step 6: Factor in Appreciation

  • Research historical appreciation in the area
  • Use conservative estimate (3-4% for Seattle)
  • Calculate total return including appreciation
  • Consider tax benefits (depreciation, deductions)

Real Seattle Examples

Let me share three actual scenarios (details changed for privacy):

Example 1: Capitol Hill Condo

  • Purchase price: $550,000
  • Monthly rent: $2,800
  • Gross yield: 6.1%
  • Operating expenses: $18,500/year
  • Net yield: 2.5%
  • Cap rate: 2.5%
  • With mortgage: -$18,000/year cash flow
  • 5-year appreciation: $137,500
  • Result: Profitable due to appreciation, but required covering negative cash flow

Example 2: Renton Single-Family

  • Purchase price: $600,000
  • Monthly rent: $3,000
  • Gross yield: 6%
  • Operating expenses: $21,000/year
  • Net yield: 2.5%
  • Cap rate: 2.5%
  • With mortgage: -$12,000/year cash flow
  • 5-year appreciation: $120,000
  • Result: Similar to Capitol Hill, appreciation-driven

Example 3: Everett Duplex

  • Purchase price: $680,000
  • Monthly rent: $4,200 (both units)
  • Gross yield: 7.4%
  • Operating expenses: $28,000/year
  • Net yield: 3.6%
  • Cap rate: 3.6%
  • With mortgage: -$8,400/year cash flow
  • 5-year appreciation: $136,000
  • Result: Better cash flow, similar appreciation

The Reality Check: Hidden Risks That Destroy Returns

Those three examples look promising, right? But they assume everything goes smoothly. Reality is messier.

Here are the risks that can turn a "good deal" on paper into a money pit in real life:

Good scenarios for Seattle rental properties:

  1. You're moving but want to keep your home

    • Already own the property (no new down payment)
    • Know the property's condition
    • Familiar with the neighborhood
    • Can cover negative cash flow from new location

  2. You have significant cash reserves

    • Can handle 6-12 months of negative cash flow
    • Have emergency fund for major repairs ($10,000-20,000)
    • Won't be stressed by vacancy periods

  3. You're planning to hold 10+ years

    • Time for appreciation to compound
    • Mortgage balance decreases significantly
    • Rents increase over time

  4. You can buy below market value

    • Fixer-upper with forced appreciation potential
    • Estate sale or motivated seller
    • Off-market deal

  5. You want portfolio diversification

    • Real estate as part of broader investment strategy
    • Tax benefits complement other income
    • Hedge against stock market volatility

When to avoid rental properties:

  1. You need immediate cash flow

    • Seattle's low cap rates won't provide this
    • Consider higher-yield markets instead

  2. You can't handle negative cash flow

    • Most Seattle properties require subsidizing
    • Don't stretch your budget

  3. You're planning to sell within 5 years

    • Transaction costs eat up gains
    • Not enough time for appreciation

  4. You don't have time or interest in management

    • Property management costs reduce returns further
    • Being a landlord requires work

  5. You're buying at market peak

    • Risk of appreciation slowing or reversing
    • Could face negative equity if market corrects

Tax Considerations

Rental properties offer significant tax benefits that improve your actual return:

Deductions

  • Mortgage interest
  • Property taxes
  • Insurance
  • Repairs and maintenance
  • Property management fees
  • Depreciation (major benefit)
  • Travel to property
  • Home office (if you manage properties)

Depreciation

You can depreciate residential rental property over 27.5 years.

Example: $650,000 property

  • Land value: $195,000 (30%, not depreciable)
  • Building value: $455,000
  • Annual depreciation: $16,545

This paper loss reduces your taxable income even if you have positive cash flow.

1031 Exchange

When you sell, you can defer capital gains taxes by exchanging into another investment property. (See our 1031 Exchange Overview article for details.)

Important: Tax laws are complex and change frequently. Consult a CPA familiar with real estate investing before making decisions.

Tools and Resources

Rental Income Estimators

  • Zillow Rent Zestimate (free, decent accuracy)
  • Rentometer (free, shows rent ranges)
  • Apartments.com (actual listings)
  • Craigslist (current market rates)

Property Analysis

  • BiggerPockets rental property calculator (free)
  • Stessa (free property management and tracking)
  • Landlordology rent vs buy calculator

Market Data

  • NWMLS rental statistics (via agent)
  • Redfin Data Center (free market trends)
  • King County Assessor (property tax history)

Property Management

  • Windermere Property Management
  • Coldwell Banker Bain Property Management
  • Real Property Associates
  • Typical cost: 8-10% of monthly rent

Summary

Key Takeaways:

  • Seattle rental yields are low (2-4% cap rates) compared to national averages (6-8%)
  • Most Seattle rental properties have negative cash flow when financed
  • Investors accept low yields betting on appreciation (4-6% annually historically)
  • Operating expenses typically consume 40-50% of gross rental income
  • Realistic returns: 6% annually when accounting for all risks (not the optimistic 12-15%)
  • Pessimistic scenario: -19% annual loss during market downturns
  • Hidden risks (bad tenants, extended vacancy, major repairs) can wipe out years of profits
  • Positive cash flow is more achievable in South King County and Snohomish County
  • Multi-family properties offer better economies of scale
  • Only invest if you can hold 10+ years and have $50K+ cash reserves
  • Tax benefits (especially depreciation) significantly improve actual returns

Your Next Steps:

If you're considering a rental property investment:

  1. Run the numbers conservatively using the framework in this article
  2. Get pre-approved to understand your financing options
  3. Research specific neighborhoods using the tools listed above
  4. Consult professionals: CPA for tax implications, property manager for expense estimates
  5. Build cash reserves of 6-12 months of negative cash flow plus $10,000-20,000 for repairs
  6. Consider starting small with a single property before building a portfolio

Related articles:

Additional Resources

This article provides general information and should not be considered financial or investment advice. Consult with a financial advisor, tax professional, and real estate attorney for guidance specific to your situation.

Share this article