Jeff and I recently bought a duplex in North Tacoma that we’re pretty excited about. We weighed the pros and cons of purchasing in the current market and ultimately decided that the property met our needs, both for the short term and the long. In light of our recent purchase, I thought it might be a good time to share some thoughts and observations about investing in real estate in Tacoma’s North End.
According to a recent report from Redfin, Tacoma has the hottest housing market in the nation. That doesn’t come as a complete surprise to brokers in the know. Tacoma has a lot to offer potential residents in terms of amenities and culture, but a big part of the city’s appeal has to do with affordability. You just get more for your housing dollar in Tacoma than you do in neighboring Seattle.
Not surprisingly, rents are on the rise in Tacoma. Between April of last year and April of this year, rents in Tacoma rose about 10%. Developers have been building new apartment buildings, but not enough to outpace demand. That means rents are likely to continue rising for the foreseeable future, making a strong argument for investing in rental properties in Tacoma.
Investing in real estate is a great long term strategy for accruing wealth but, like any type of investment, it does involve risk. That’s why it’s important to educate yourself before becoming a landlord.
5 Things to Consider BEFORE Becoming a Landlord
- Will you manage the property yourself or will you hire a property management company? If you decide to manage the property yourself, you may still benefit from assistance with screening potential tenants and/or evicting tenants if things don’t work out. Landlord Solutions is a great local resource for those types of services.
- Will you allow pets? Cats? Dogs? Large? Small? Allowing pets will obviously increase your potential applicant pool, but pets can take a toll on a house, which might cost you more than it’s worth in the long run.
- If your property is located near the University of Puget Sound, Tacoma Community College or UW Tacoma, will you rent by the room to attract students? You may be able to earn more income if you rent by the room, but you can also expect more wear and tear on your property.
- Have you talked to your insurance company to find out if there will be an increase in your premium if you convert a homeowner’s policy to a landlord’s policy? Our preferred insurance agent Jerry Hallman at Farmers is a great resource for exploring your insurance options.
- Have you spoken with your accountant about the potential tax implications associated with owning a rental property, converting your primary residence into a rental or selling a rental property? What expenses can be counted as deductions on your tax returns? How can you avoid capital gains taxes when selling a rental property?
Short Term Rentals?
With the emergence of marketing platforms like VRBO and Airbnb, short term rentals have become a very popular way for homeowners to generate income. Short term rentals may offer a greater return on your investment than a traditional rental property, but it feels like the short term rental market in Tacoma is becoming saturated. Jeff and I were initially thinking about using our new duplex units as short term rentals but are now leaning towards a more traditional long term rental approach.
If you have questions about investing in Tacoma real estate, please don’t hesitate to contact me. I’m here to help.
Mark Pinto is a top-producing Realtor with Windermere Professional Partners, specializing in residential real estate in Tacoma, Gig Harbor, University Place and Lakewood.
Mark Pinto: (253) 318-0923