Welcome everyone to another edition, Market Hunter Thursday with Herve. We're so excited. Today,
our show is taking us all the way to the other side of the coast, the left coast,
Seattle Washington. Let's go get some stats, some market stats specifically about the
city of Seattle Washington, population 776,000, median income of $92,000 median rent of $1,600,
and median home value of $130,000 or just less than that. Amazon, Starbucks, Microsoft,
Nordstrom, Costco, if not directly in Seattle, then on the outskirts. A lot of activity going
on in the city of Seattle, Washington. I'm so excited to have today our guest,
Mr. Preston Walls from Walls Property Management, so without further ado fellows,
let's go ahead and get started. Hey, Preston. Welcome to the show, my man.
Hey, thanks for having me. Excited to be here. Well, what's so exciting about investing in
Seattle, and what specifically real estate investing do you and your team do in Seattle?
I grew up in Seattle. I was born and raised there and went to school on the East Coast and
moved away. I thought I was going to be on Wall Street for the rest of my career and
just ended up getting burned out. You and I both, by the way.
Something happened to us. It was like, "This is not going to be for the rest of our careers."
Yeah. Yeah. I grew up with real estate. My father was a real estate developer in Seattle.
I had various businesses during high school and through college.
I painted. I painted houses. I painted commercial properties.
I saw the business through that lens. It was what I knew. It was what I was familiar with and what
I'd grown up with. It was a logical transition for me from Manhattan, to head back to Seattle. It's
very similar to your New Jersey markets. It's capital appreciation market. Cashflow is limited,
so you've got to find a way to make properties work out that are not cashflow based. That
niche that I've identified are these significant value add properties that at the end of the day,
you can extract your equity out of it not by selling, but through refinance. Do the renovation,
get the value up, and refi it to take your capital out and redeploy it in the next project.
Got it. Got it. Got it. Makes sense. Folks, if anyone has questions for Preston, please go ahead
and put it in the comments box and we'll make sure to get it out. If you're watching on YouTube,
please smash that subscriber button at the bottom of the screen. Preston, when we talk about
different real estate strategies, we have viewers on this show that are just beginning
a flipping strategy or they're veteran flippers themselves. Then of course we have folk that
too just buy and hold rentals, right? Whether it's single family rentals, definitely a lot of
small multi-families, duplex, triplexes. What have you found that Seattle attracts
from that perspective, and do you see any seeds of change taking place based off of a lot of the
activity that's been going on in Seattle? My first property was a house hack, and
it was a triplex turned into four unit building. I lived in one of the units. That's a great way to
get yourself a low cost place to live in an expensive market.
Right. Get into an asset that you can grow and leverage.
Yeah, I still own that property, the first one I bought, and it's cash-flowing well for me now.
Is there been a lot of opportunities for house hacking now or, have prices ... One thing is,
prices seem to definitely picked up not only across the country, but specifically in your
neck of the woods over there in Seattle. There's always going to be challenges to
get into a market. Right? There's always hurdles. It's always going to be hard. Just specifically
due to COVID, it has created a lot more opportunities in urban areas, in dense, expensive
areas like Seattle. There's been this exodus from urban areas. People want more space. I think this
is a good opportunity, a good time in the cycle to invest, if you want to be in an urban area.
It's been a good time to get in and get a good opportunity. The other thing, house hacking, it
favors the entrepreneurial, scrappy. You've really got to figure out a unique way to make something
work. It's not very scalable. No, no. No.
You can only live one place. Yeah. Exactly.
Is it a great way to get started, get your foot in and build some equity?
Yeah, yeah. Yeah, yeah. It's interesting that you say about that in regards to a lot of activity
taking place in an urban area. There's definitely, there's been this urban flight that had been
taking place even before the pandemic. It has accelerated due to pandemic. I don't know if this
is a cyclical shift or if it is a secular shift. I like to believe that some folks that have left,
that are going to come and move back, especially if we see prices drop in those urban areas.
There's only so much the suburbs can take. I think, trust me as a person who used to
do that commute into New York city every day, you will all get tired of it. I promise you.
There's a lot more competition. The smaller, the fewer the units there are in the building,
so right at a duplex, we're having a lot more competition because
you have competition from the single family buyer market, which is really, really hot.
The multi-family buyer market is a lot less hot because in Seattle rents are down significantly
from their pre-pandemic level. As people have moved out of the city, I expect that to return as
people come back to the office and jobs return. Listen, let me talk about vacancy. That goes
square to what you do, being a property manager. What can you tell us from the perspective? What
concessions that property managers have been putting out there, in order to go ahead and fill
some of these vacant units that might be in some of those areas where you said flight has
taken place? What has been happening to rents, as well? If they have been softening up, is it
falling off a cliff or is it death by a thousand cuts thing? What are you seeing on your side?
I would say it fell off a cliff in about September of last year.
Where are we on rents right now, would you say? For one bedroom, decent area in Seattle.
Well, just overall across our portfolio, all property types and unit sizes and types,
I would say turnover rents are off mid to high teen percent, so 16% to 18% price decrease
if that unit comes available today. Right.
That doesn't mean that the lease price dropped that amount. That includes, you can even get there
by adding in some concessions to make up that amount. It depends.
Smaller spaces, studios, especially small studios are a lot less desirable than larger spaces.
That's counter to the trend that's been happening for a long time. People have been
gravitating smaller and smaller spaces because it's
more and more affordable. It's not uncommon in Seattle to see two to three months of free rent
on let's say a 12 to 16 month lease for well located Class A properties.
When we talk about the outskirts of Seattle, where you can still get into the city downtown within
30 or 40 minutes, where have you been seeing a lot of real estate investing taken place?
Are those properties a little bit more cashflow centric than let's say what you see in the
downtown urban area specifically of Seattle? Yes, absolutely. Just from our survey data of
outgoing residents, there they are by and large, they're staying in state and
they might be leaving Seattle proper, but they're going to the first ring. They're not going
too far to still commute, but during this time when there's a lot less emphasis on commuting,
people are prioritizing having additional space, having additional green space access
to parks and trails over urban amenities. Can you give us the name of some of those towns,
some of those secondary and tertiary towns where they might even be benefiting off of
the economic strength that Seattle proper has always benefited from?
Yeah. Shoreline is one to the North of Seattle. Kent and Auburn
to the South. The corridor along I5 between Tacoma and Seattle has been popular, as well.
Have you been seeing more development taking place in these areas, as well, as folks have
been moving out and the real estate investment has been moving out to some of these secondary
areas? Have you been seeing more developers putting shovels in the ground to try to
really match some of that demand? That one's harder to observe because the
entitlement cycle is so long. It's about a three-year process to get a building permit,
from when you say- Wow.
A lot of time has gone by to see if this will cause a shift. The larger developers
are still full steam ahead on projects in Seattle, on continuing to do entitled projects.
There have been some smaller projects that are all studios. They have smaller units that have
paused construction. I've seen a lot more permits on the market for the sites like that, just
because that product is out of favor right now. What other asset have you been seeing that's been
gaining more attention, real estate opportunities? Whether we're talking about industrial, office,
mixed use, storage, mobile homes, do you have your finger on the pulse of any of those areas
that have been appearing a little bit more attractive for real estate investors, as well,
based off of a lot of what's going on in the economy of Seattle?
Seattle is very Amazon centric. The whole damn world is very Amazon
centric. Okay? How about that? Okay? Pop up, Amazon is planning to put another
distribution center someplace. Yeah. Well, the housing.
Yes. Housing
has been driven. If there's been one factor, it's jobs, corporate office jobs that are created
by Amazon. That that has just fueled the boom in housing prices and rents
over the past seven or eight years, and during this cycle. The industrial component,
there's really interesting things happening around smaller distributions, around cold storage
distributions, grocery, grocery delivery, a lot more demand for distribution
spaces as this Amazon model takes hold and has been accelerated by the pandemic.
Got it. Let's give you the opportunity to give us a plug on Walls Property Management. What
specifically areas does Walls Property Management cover? What areas do you guys manage properties?
What are some of your goals for 2021? We operate in Seattle exclusively, so
Seattle's are our only market. We're niche because getting into an expensive market,
capital doesn't it doesn't buy you as many units.
True. My portfolio is a lot of smaller unit buildings.
That's become the focus of property management and what we've gone out to the third-party market
for property management in. You have to manage a smaller building differently than you do
a big building with a leasing office and onsite staff. Keeping things close together
is a way of keeping our costs down and reducing
just trip, travel time for maintenance staff and leasing staff to get out to a geographically
broad array of buildings. Geographically broad for me means 20 to 30 minute drive from
our property management office in Seattle. That guides my investment decisions, as well.
Got it. Seattle is a pretty big place
geographically, and I only focus on probably less than half, maybe less than a third of the city
as my target area for investments Preston, how many doors does your team
manage right now? A little over 900.
Okay. All right. Has there been consolidation in this space so property managers can take
advantage of the scale, and like you said, having leasing managers, perhaps over
oversee several buildings, rather just one, just to absorb the costs and things like that?
I would call it more just turnover and market evolution rather than consolidation.
Some of the cycle of building ownership is, you manage your properties yourself,
and you get to a point where you're tired of it. [crosstalk 00:16:24].
Hey, listen, Preston, and we're nearing the end here, man. One of the things that we always do
for guest speakers, we like to hook them up, thank them for joining the show. To our viewers here on
our channel, Facebook, as well as YouTube, how can we help you out and what you do at Walls Property
Management, in order to achieve the goals that you guys are looking to get through this year?
Thank you for having me on the show. Absolutely.
I've been able to talk Seattle. My contact info is Preston@WallsPropertyManagement.com.
Yep, we got you. Our investor side is WallsPropertyGroupRE.com.
Sign up for our investor newsletter there, and I'd be happy to keep in
touch on projects that we're seeing in Seattle. All right, man. Sounds good. It sounds good. Hey,
folks seems like some nice opportunities over there in Seattle and Preston and Walls Property
Management could be your man once you do lock down one of those nice buys and holds. 900 units under
management right now tells me that this person, they know what they're doing. They have contacts
in the city and so on and so forth and a lot of intelligence in regards to market information,
where to be, where not to be, what could be a good investment property or not. You have Preston's
contact information there. Please use it as a part of your research if you're looking to
go into Seattle. Preston, I can't thank you enough, man. I appreciate you being here.
Hey, you bet. Thanks for putting this on. Great job with it. I enjoyed being here.
All right. Sounds good, man. Listen, take care and, and be well.
You, too. Bye-bye.