What you need to know about buying a rental property in Olympia, WA
Olympia, Washington is an attractive real estate market. Since it sits in close proximity to Joint Base Lewis-McChord, there is a constant inflow of new tenants. It doesn’t hurt that the area around the state capital is also incredibly beautiful. Because of these and other factors, Olympia is a prime city in which to set up a rental property. If you’re looking to get started, there are a few things to know.
How do homes typically perform in Olympia?
Make sure that you have a complete picture of the real estate market before you make a choice. Keep in mind that in addition to this helpful article it’s best practice to do further research on your own. There’s also the caveat that past performance is not necessarily an indicator of future profitability. In the five years leading up to July 2018, the average price of all homes in the area rose by almost 9 percent. While an increase in housing prices might not seem like a positive thing for would-be landlords, it does indicate a high interest in living in Olympia and is a sign of steady growth.
The type of home matters
Did you know that the type of home you choose to buy can have an effect on profitability? To get a full picture you need to break the Olympia real estate market down by family size. One-, two-, three-, and four-bedroom houses all grew at different rates during the last five years. For instance, the median price of a one-bedroom house between October 2017 and July 2018 is $245,669. They grew at a rate of about 25 percent over five years but are still set at a low price and are likely affordable for a wide range of budgets. An attractive rental property is about more than just the purchase price.
Compare rents to cost
The average rent for one-bedroom houses during that time was $1,175 a month. When you compare the cost of rent, what you as the landlord take in every month, to the amount that you paid for it, the numbers give you an idea of how long it takes to start making real money. Assuming that you paid cash up front and had no other expenses related to the house, it would take you over 17 years to earn your money back. This doesn’t factor in maintenance, tax, and insurance, and it assumes that the rent stays constant.
The average two-bedroom home had a cost of $274,719, and a rent of $1,750. Comparing purchase price to rent taken in, a two-bedroom is a much higher value. It would only take 13 years to make your money back. Two-bedroom houses historically show a far higher value than one-, three and even four-bedroom homes.
Profitability in the long term
When you factor in the cost of a mortgage, maintenance, and insurance, plus taxes on top, and you can see that owning a single rental home might not always pay for itself. You likely need to work at a day job while you’re paying off the mortgage. If it takes so long to pay off, is a rental home really a sound investment? It certainly can be. Besides regular monthly income, there are other perks of ownership.
You might be able to deduct many of your expenses from the maintenance or mortgage from your tax bill. Rental properties are long-term investments that tend to pay off over time. Once you have the mortgage paid off your costs go down considerably, and you start to see a greater monthly return. If you have multiple properties you can use the income from the first properties that you pay off to finish the rest of the mortgages sooner. You might be able to retire sooner, living solely off of the income from the home rents, or supplement it with your retirement accounts.
It’s possible to make a profit from your rental properties even before you pay off the entire mortgage. Assuming that the resale value of a home increases beyond the rate of inflation over the same time and that you have enough of your debt already paid, you can sell your home for a profit. The lump-sum sale can go to fund your retirement, help you to buy a residence of your own or you can roll that money back into real estate, purchasing a cheaper house outright and erasing the mortgage payment from your monthly expenses.
What can you do to make it more profitable?
One key to making money off of any venture is to keep your costs low. These include property and income taxes, maintenance, and homeowner’s insurance. One way to do this is to leave property management in the hands of experienced professionals. Here at Olympic Rental and Landlord Services, we’ve got years of experience doing just that. Our team takes care of tenant applications, rent collect and maintenance for you. We can see all of the hidden costs and issues associated with property ownership and rentals, even before they come up. It’s our job to help you navigate the process seamlessly.
Running a rental property is a tricky proposition, but one that comes with the possibility of great rewards. You need a clear picture to know what you’re doing, and any successful plan revolves around knowing the full history of the area where you plan to operate. Make sure to research statistics before you make a decision, then make an appointment with us. We can sit down with you for a free consultation to determine what you need and what’s within the scope of your budget. We succeed when you succeed. Use the contact form on this site to get int contact with us and set yourself up for the future today.