Confessions of a Tacoma Real Estate Entrepreneur

Every investor will have their collection of tales in real estate investing. They will have the tale of the "one" that got away. They will have their defining moments in defeat and in victory. I would like to share such a tale with you.

In Late Summer of 2006, I was heavily invested in the Sixth Avenue district in Tacoma. I had researched every parcel up and down that business district, primarily because of the zoning (which is mostly Residential Commercial Mix-Use and Neighborhood Commercial Mix-Use). I felt strongly that Sixth Avenue would become the next Capital Hill in Tacoma. The district is still mostly made up of single family homes but with great zoning and is within walking distance of a lot of great restaurants and bars.

As I dug deeper into the zoning (height limit for most parcels between Pine and State Streets and N. 8th and S. 8th is 45') and the parcels in the area, I realized that sooner or later land prices would become a premium. Why?

SFH prices were high and far outpriced the value of the land they sat on. Homes in the area typically go for 250k plus and usually sit on a smaller than 5k square foot parcel. Actually, there are very few SFHs that sit on anything larger than a 5k lot. I used the mapguide viewer on the City of Tacoma's GovMe site extensively for this. This research led me to make two decisions first I bought a four plex sitting on a 7800 square foot lot that had a nice rental income stream and was well priced at the time. And secondly, I targeted several parcels for acquisition.

One such parcel was located across the Jack in the Box on State Street, it was a small three bedroom rental on a 10k lot. The owner was in the local area and bought it for less than $150k. She had owned it for about three years. I cross referenced her name with White Pages, got a number, and made the call.

I told her I was a local real estate investor and was interested in her house on State street. I asked her if she had any intention of selling and she said she didn't. Not wanting to lose the opportunity, I made a verbal offer of $300k on the spot. She took a deep breathe and asked if I was serious, I said absolutely and said there would be an written offer to her in an hour.

I wrote the offer up with and/or assigns (I like having flexibility), and it was accepted. I knew the land value of the property was worth significantly more than $30/sq ft, so I reached out to several area investors and ended up assigning the contract to a Seattle developer for $17k. Not a bad little deal for the amount of time invested. By the way there are no other SFH on 10k lots in the Sixth Avenue Area that would be at this price point (I have looked).

Look for opportunities, aggressively pursue them, make a strong offer and move the deal.

I use Redfin ...

I use Redfin to look at Real Estate lisitings in Seattle and Tacoma. I used to use Windermere (they uploaded new listings the quickest) and John L Scott is nice for some commercial listings (why can't the CBA website have rendered graphic listings over a map???).

I use Redfin due to two facts.

1. I love to see what I might save if I don't use a traditional buyer's agent (I usually end up telling them which listings I want to view anyways, they just have the MLS Key).

2. They have unique features that shows the number of days on Redfin (on the market) and the price chanes to the listings. Not to mention the tax and parcel information that normally I would have to go to Pierce County's Assessor-Treasure site or Tacoma's Government Made Easy site (easily the best tool for an investor in Tacoma).

Rental Market Heating Up WSJ Article

Bidding War May Be Moving to Rental Front

The country's apartment sector is seeing more bidding wars as tenants jockey for available rental units in increasingly tight markets.

Nationwide, rent for a 1,000-square-foot apartment has risen 3.7 percent in the last year to $1,389 a month, says Property & Portfolio Research Inc.

One of the main reasons for climbing rents is the reduced inventory of units, created in part by developers that built condos or converted rental stock into for-sale units during the home sale boom.

In the second quarter of this year, rental vacancy rates fell to 5.3 percent from 6.2 percent in the year-earlier period. This has produced what is known as a "landlord's market," with companies like AvalonBay Communities Inc. raising their asking prices and cutting concessions for incentives like a free month's rent.

Source: Wall Street Journal, Christine Haughney (10/11/06)