Seattle is a city that continues to grow in terms of population and economic status due to the beauty of the region and its strong tech-centered economy. However, due to weather issues and the age of existing homes, flipping houses in Seattle can be met with potential problems related to the renovation of properties.
Additionally, the real estate laws in Seattle require licensing as a contractor to do fix and flip investments. However, behind the obstacles to making money in real estate is a flippers market that is full of opportunity and potential for substantial returns on investments when it’s done successfully and in a smart manner.
So, in this article, I will talk about everything related to flipping houses in Seattle – from a look back at the Washington state real estate market in general, what makes for a suitable investment property to fix and flip, to the best neighborhoods for flipping houses in the great city of Seattle.
Related: Flipping Houses for Beginners: What You Need to Know Before Starting
Washington Real Estate Market Analysis
In the past two years, the Washington housing market faced circumstances similar to that of every other market in the US. Buyers flocked to the suburbs to purchase secondary homes while prices skyrocketed across the entire nation due to increased demand and a shortage of supply.
According to Zillow, in November 2021, home prices rose at a rate of 22.8%, compared to the same month from the previous year. And while the trend is expected to slow down in 2022, home prices are still increasing across the country.
With big tech companies like Microsoft, Google, and Meta based in Seattle, the market is still hot and prices are increasing. Seattle, in general, is an expensive city when it comes to real estate, with the median home value sitting at around $700,000.
Although some areas in Seattle are cooling off a little, there are still many great locations for flipping houses in Seattle if you know where to look. But before getting into that, let’s look at some of the trends related to flipping houses in the Seattle real estate market.
House Flippers Are Avoiding Higher End Houses
Real estate investors who specialize in flipping houses are focusing on mid- to lower-end houses, as indicated by the disparity between the median home value in the market being considerably higher than the median resale value of flipped houses. House flippers are focusing on relatively affordable areas where it’s more common to find damaged properties that they can fix and flip.
It’s important to note here that due to the significant impact of house’s condition on the after repair value (ARV) for when you want to flip it – properties in a worse condition offer a higher potential for increasing their value after the renovation process.
It largely depends on the amount of money that you’re willing to spend on renovation. A good rule of thumb is to budget 70% of the property’s price into budgeting. So, if a property costs you $200,000 to buy, you will need a total of $340,000 as a budget for purchasing and renovating the property.
Flipping Is Generating High Revenue
The average revenue per flip in the Washington real estate market is much higher than the national average. In 2021, the revenue per flip in the US was around $60,000, while in Washington, the revenue per flip was around $105,500.
This is excellent news for real estate investors interested in flipping houses in Seattle, as focusing on properties that have the potential to be transformed might reward you generously when the property gets resold.
Home Values Appreciated by 15.1% in 2021
In 2021, home values appreciated by around 15% in the Washington housing market. This trend of increasing house prices has been going on steadily for nearly a decade now.
It means that the Washington housing market, in general, is a stable and robust market, and it is reasonable to assume that it will continue to grow for the foreseeable future. Washington is known to have historically low interest rates that have kept the demand high for properties.
Like most other markets, the biggest problem in today’s Washington market is the inventory shortage and that there are more buyers than sellers in the market, making it harder to land a deal.
The Median Home Value is Expensive
Median home values in the Seattle housing market are not only increasing at a significant rate but are expensive to be with. With a median home value of around $700,000, flipping houses in Seattle might not be within every investor’s reach. It doesn’t mean, however, that there aren’t some great deals when it comes to finding affordable houses to flip in Seattle, as we will explore later.
Related: Washington State Housing Market Forecast 2022
What Makes for a Good Investment Property for Flipping?
When flipping houses in Seattle in 2022, there are a number of things that every house flipper needs to take into consideration. Some of these tips apply to investing in real estate in general, while some are specific to the fix-and-flip type of investments.
Location
When it comes to investing in real estate in general and flipping houses in particular, the location of the property is always the most important factor that affects the future of your investment, as there are many things that you can change about the house. Still, location isn’t one of them.
Since real estate investors usually buy homes that they aren’t going to live in, sometimes they tend to ignore certain aspects of the house that their potential buyers will later pick up on.
So, when you’re considering flipping houses in a market, keep in mind the type of buyer that you will want to sell your home to and whether the house’s location is suitable for them.
Property Type
Once you start narrowing your search to a few neighborhoods, it’s time to search for low-priced homes that you can afford. This can be done using a comparative market analysis of the area to see what the average property price is and be able to identify properties that have better prices.
However, when picking a property, make sure to keep in mind the area’s general state. If you buy a large house in a neighborhood that consists of mostly small houses, you’ll need to remember that most buyers coming to this neighborhood will be looking at cheaper properties, and your property will be over their budget.
On the other hand, having a big property can be its own selling point, and you want to focus on buyers who are specifically looking for the “largest house on the block.”
Renovations
As a house flipper, when you’re flipping houses in Seattle, you will be looking for properties that are damaged or distressed and are in need of renovations. However, not every distressed house is a house that’s worth saving, as certain damages can be too expensive to repair and will result in you making less profit or no profit at all from your investment.
For example, properties that have a damaged foundation will most likely be too expensive to repair to be worth the investment. For this reason, it is of utmost importance before buying a house to flip that you get the house thoroughly inspected. While this will cost you some money to inspect properties that you might not even end up buying, it will save you a lot of money in the long run.
Related: Home Renovation – A Guide for Fixer-Upper Investments
Numbers
Flipping houses can be more tedious to analyze and crunch down the numbers for. It is because of all the different costs and expenses that you will need to consider – from inspecting the home, minor and major repairs and renovations, to closing the deal and having the house listed for sale again – all of these are expenses that you need to include in your calculations.
So, find time to sit down with a local real estate professional to go through the math together. There’s a lot that goes into choosing a property when flipping houses in Seattle or anywhere else. This will help you avoid overlooking any little details or fees or taxes that can come back and haunt you in the long run.
Investors need to consider and calculate all associated renovation expenses when flipping houses in Seattle
How to Profit from Flipping Houses in Seattle
So, how exactly do you make a profit from flipping houses?
Flipping houses (aka fixer uppers or fix-and-flip) is a fairly simple concept: you purchase a property that is distressed or damaged and therefore is being sold for a much cheaper price than its original value. You then repair or renovate the property to make it in a good livable condition again, and you sell it back at a much higher price than what you bought it for in order to make a profit.
However, in order for you to actually make a profit, the total amount of money that you spent, not only on purchasing the property but also on renovating and repairing it, needs to be lower than the price you’re selling it for.
But how can you know how much a property’s renovation is going to cost you without first finding a property to renovate?
This is where the 70% rule is used – simply budget for an amount of money equal to 70% of the property’s pre-renovation price. It is the amount of money that you will likely be using to renovate the place.
Another important thing to take into consideration here is that you will also have running costs for as long as you own the property before selling it. These running costs also need to be factored into the total costs and expenses.
Best Locations in Seattle for House Flippers in 2022
So, where should you be concentrating your search when it comes to flipping houses in Seattle?
In this section, I will be providing you with the market data for the Seattle real estate market and the different neighborhoods in Seattle that are considered strong investors markets and that are affordable.
This data is from Mashvisor and is based on data that is gathered from the MLS, Airbnb, and off-market sources before being analyzed by Mashvisor’s algorithms to give you market insights and help you find better investment properties across the nation.
Seattle, WA – 2022 February Performance
Median Property Price: $625,396
Property Size: 630.2 sq. ft.
Traditional Rental Income: $2,316
Traditional Cap Rate: 2.38%
Airbnb Rental Income: $3,634
Airbnb Cap Rate: 3.24%
Occupancy Rate: 70%
Walk Score: 71
Now that we’ve seen how the market is performing in Seattle – which looks very stable and still growing – let’s take a look at the top neighborhoods for flipping houses in Seattle based on affordability and their attractiveness for new buyers:
Denny Triangle, Seattle, WA
Median Property Price: $449,500
Property Size: 574 sq. ft.
Traditional Rental Income: $2,688
Traditional Cap Rate: 4.39%
Airbnb Rental Income: $2,953
Airbnb Cap Rate: 3.41%
Occupancy Rate: 75%
Walk Score: 99
Central Seattle, Seattle, WA
Median Property Price: $279,500
Property Size: 567 sq. ft.
Traditional Rental Income: $1,608
Traditional Cap Rate: 3.55%
Airbnb Rental Income: $2,658
Airbnb Cap Rate: 5.12%
Occupancy Rate: 76%
Walk Score: 93
North College Park, Seattle, WA
Median Property Price: $375,000
Property Size: 389 sq. ft.
Traditional Rental Income: $1,592
Traditional Cap Rate: 1.06%
Airbnb Rental Income: $2,858
Airbnb Cap Rate: 2.76%
Occupancy Rate: 66.73%
Walk Score: 74
First Hill, Seattle, WA
Median Property Price: $299,950
Property Size: 497 sq. ft.
Traditional Rental Income: $1,510
Traditional Cap Rate: 2.92%
Airbnb Rental Income: $2,162
Airbnb Cap Rate: 3.28%
Occupancy Rate: 67%
Walk Score: 97
Uptown, Seattle, WA
Median Property Price: $460,000
Property Size: 920 sq. ft.
Traditional Rental Income: $1,392
Traditional Cap Rate: 1.15%
Airbnb Rental Income: $3,044
Airbnb Cap Rate: 3.36%
Occupancy Rate: 76%
Walk Score: 71
How to Find a House to Flip in Seattle?
So, now that you know what are the best neighborhoods for flipping houses in Seattle in 2022, how do you start your journey of finding distressed or foreclosed properties in these real estate markets?
Mashvisor offers you a solution: our Investment Property Finder is a tool that was designed to help real estate investors like yourself find the perfect property to invest in based on actual up-to-date real estate data and the power of analytics.
The Investment Property Finder tool allows you to search through any market you want based on your search criteria regarding property prices, rental income, property types, and much more.
To learn the tool helps you as a home flipper, book a demo here.
The tool includes a filter that allows you to only search for foreclosed and off-market properties that have a higher chance of being distressed homes that you can use for a fixer upper.
This makes it much easier to find properties within your price range and in your market of choice while also providing you with historical data and future projections about that property’s performance as a traditional or an Airbnb rental property, which is data that can help you sell the property after you renovate it.
Sign up for a 7-day free trial of Mashvisor followed by a 15% discount on your quarterly or annual subscription.