What it’s really like to invest in Seattle

This week, we head to the Emerald City and hear from Tom Hume, an investor and real estate agent.

Average home price: $848,869 (down 2.2% YoY)
Homes that sell over list price: 18.7%
Homes that sell under list price: 55.9%
Average rent: $2,187/month

Pros: Between Amazon and Microsoft, Seattle’s tech boom has pushed home prices sky-high. But nearby suburbs, like Tacoma, still offer relative bargains. “The median price in Tacoma is 5.7 times median income—above the national figure of 5x, but below Seattle’s 7.48x,” says Hume, who recently bought a house here for $346,000, spent $15,000 on renovations, and now rents it for $2,185.

The cons: Tacoma’s landlord rules are tough, and getting tougher. “The city has instituted tough regulations in recent years,” Hume says. Rent increases require a 180-day notice, hikes of 5% or more may require landlords to cover moving costs, and tenants with kids can’t be evicted during the school year. The result? “Many landlords have left the market,” he says—potentially reducing supply and driving rents higher.

His advice: “Familiarize yourself with Tacoma’s Rental Housing Code and Landlord Fairness Initiative, a local layer of laws to be aware of,” Hume says. Also, keep an eye out for ways to take advantage of new laws, such as the Home In Tacoma project, which encourages affordable developments like DADUs (detached accessory dwelling units).

This is why Hume’s latest purchase had a large backyard and alley access, which would allow a second rental to be built out back. “I plan to build DADUs on at least one of our rental properties,” he says. “It’s like getting a free piece of land.”