2 Bedroom Seattle Condo That Cash Flows

Cosmopolitan Unit 1904 ℅ J. Torres e1350317125493 2 Bedroom Seattle Condo That Cash Flows
Ok, I don’t always analyze investments for you guys, but this one makes too much sense. It is an example of a good condo, that has great upside from a cash-flow perspective and long term investment potential. Unit #1904 just closed this week. It is a 2 bedroom, 2 bath at 1,195 sq. ft. The sale price was $529,950.

Here is the scenario:

Purchase price: $529,950
Down payment: 20%
Loan amount: $423,960

Let’s assume the borrower can get a 3.85 % rate.

Monthly payment amount: $1,987.56
Homeowners dues: $561 per month
Taxes: ($3,961 or $330.08 per month)

Total monthly payment: $2928.64

My estimated monthy rent: $3,200

Monthly cash flow:  $271.36

Now you may say….”Jeff, thats not a lot of monthly income. There is downside risk, leasing fees, etc…”  I would respond with the following advantages:

  • 2007 building (The Cosmopolitan)
  • Phenomenal location (walking distance to South Lake Union)
  • Amazon is your neighbor (high quality prospective renting pool)
  • Employment growth
  • One block from a bus-line
  • Great floor plan, big views
  • Excellent building with high quality amenities (24 hour concierge, business center, spa, sauna, rooftop deck, homeowners lounge, guest suite, etc..)

In addition to the above mentioned, zero condos have been built since 2009. If there is a place to make a real estate bet, its Seattle. This is a good unit, sold at a great price and in my opinion it can be looked at as a excellent rental.

Cosmo Deck View 2 Bedroom Seattle Condo That Cash Flows

 

  • http://www.facebook.com/fboosman Frank Boosman

    It’s a beautiful condo, and I agree with your general sentiment about the condo market downtown, but in this specific example, I’d add a few things to your calculations. First, you’re going to have to cover insurance, right? Won’t those payments come out of the purchaser’s escrow account? Second, what about the value of the down payment if it’s not tied up in the loan? 5-year CDs are generating 1.9% at the moment, so that’s $167/month. Third, if the condo is unrented (or a tenant walks away without paying) just 1 month every 2 years, that’s $133/month right there. If the idea is to *roughly* break even while building up equity, this could well be a solid proposition. But if someone went into it thinking they’d net $270/month, I think they’d be surprised, and not in a good way.

  • http://www.urbancondospaces.com JR | UCS

    Thanks for contributing and adding a thoughtful response. I certainly feel that these types of investments can be debated. I tend to see long term value in this type of purchase given the status of the market, inventory, rates etc… I also feel that the economic impact of Amazon and others are adding value to the neighborhood. To add to your point, there are risks of leasing as pointed out and downtime between rentals. Again, thanks for adding the forum.

  • http://www.facebook.com/fboosman Frank Boosman

    Agreed with your points in general, especially about the likely course of the condo market downtown over the next few years. Actually, if I were in the market for a rental unit that I could hold for 5-10 years while I built up equity at little or no monthly cost, I’d seriously consider a unit like this. I’d just go into it thinking that I could end up with a monthly cash flow plus or minus $300 from neutral, maybe slightly more in either direction, and planning for low-probability events (like Insignia coming on line and flooding the market, which I think to be highly unlikely at this price point).