For most of us, buying a home is a lot like dating. The properties we consider are like partners that we hope to spend our life with. We want to know that we can feel comfortable and fulfilled in whatever home we choose to invest in. In other words, we want to find “the one.”
However, E.P., a Seattle commercial real estate broker, isn’t so romantic about his home buying decisions. Having bought a Greenlake condo in October 2017, E.P. looks at his property investments from a cold, by-the-numbers perspective. If the finances fly, the home is his. Professional experience with the real estate business is what allows E.P. to feel secure about his purchase.
We sat down with E.P. to walk through how he crunched the numbers to figure out the valuation of his condo, and beat out two other offers along the way. Keep reading to get his expert take on the Seattle real estate market, and his advice for knowing the right time to buy a home.
Why did you decide you wanted to buy a home? What made you think this was the right time to buy?
It’s always the right time. People who wait for the market always fail. Being a commercial real estate broker, I knew that buying something, especially in the Seattle market, would be a smart investment. From a financial standpoint, I had enough in savings, so it was just a matter of finding something that made sense numbers-wise.
It was about a year from the time I started looking until I found the one I bought. I had put in two offers before the one I finally bought. I lowballed those two offers because I wanted a five to seven percent capitalization rate. The condo I have now had a list price with a cap rate I was happy with, so I bid at list price. I buy things by looking at the return from crunching the numbers, and this one looked really good to me.
What did you look for in a home?
I looked at buying a home from a straight monetary standpoint. I put in the numbers and knew I could make a profit. I just needed to make sure it gave me a five percent capitalization rate based upon the income value of what I could rent it for, including what I pay myself in rent. If the total income minus operating expenses was five percent more than the actual price, then I was considering it.
How was the process of buying the home for you?
The process was straightforward for me. I made my offer at list price. There were two more offers, but I waived all contingencies – including the financing contingency – since my bid was in cash. I also waived doing an inspection, since the condo’s documents had all the information I needed on the building. I looked at it on a Friday and moved in within two weeks.
Were you hesitant at all about buying a condo, knowing there’d be a possibility of paying for a special assessment in the future?
I looked at the reserve study and broke down potential issues that might come up in the next five years and what the special assessment would be per unit. No HOA is fully funded. There is a risk of having to pay for a special assessment. It’s just a part of buying a condo. I take it all into consideration.
What advice would you give someone trying to buy a house in Seattle?
Personally, I think Seattle is the best place to buy a home. Rising tides lift all ships, but you don't know who has their shorts on when the tide goes out. Seattle is rising so fast that even if you make a mistake, it will get covered up, because the city still has a lot of room to grow compared to other cities. I would suggest everyone just buy something.
Do you think we are in the height of the market?
I think we are always in the height of the market, but at the same time, the market always goes up. As for real estate, it all comes down to how long you are planning to hold. If you are trying to make money in a year, real estate is not the right way to go, because the market might go up or down. But if you have a five-year outlook, the market trajectory will ultimately point upward.
Location: Green Lake, Seattle
Purchase Date: October 2017
List Price: $300,000
Offer & Sold price: $300,000
Closing: 4 days
Earnest money: $15,000
Contingencies (Financing, Title, Seller Disclosure): none
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