How to Analyze a Seattle Real Estate Investment
Seattle Real Estate Investment Analysis: Capitol Hill 4-Unit Property
Seattle’s Capitol Hill is a vibrant, high-demand rental market, making it an attractive location for multifamily investors. This analysis evaluates the investment potential of a 4-unit property priced at $1,100,000, using critical financial metrics. Whether you are working with a Seattle real estate brokers or not, understanding these metrics is crucial for a successful investment.
1. Income & Cash Flow Analysis
Gross Rental Income:
Monthly Rent per Unit: $1,900
Total Monthly Gross Rental Income: $7,600
Annual Gross Rental Income: $91,200
Adjusted for Occupancy (98%): $89,376
Operating Expenses:
Property Taxes: $11,000
Insurance: $7,200
Utilities: Tenant Paid (Excluded)
Total Estimated Annual Operating Expenses: $18,200 (excluding maintenance/capex)
Net Operating Income (NOI):
2. Key Investment Metrics
Cap Rate (Capitalization Rate):
🔹 Interpretation: A 6.47% cap rate is on the high-end range for Seattle real estate investment properties, though cap rates vary by neighborhood. Higher appreciation may compensate for a lower cap rate.
Cash-on-Cash Return (CoC Return):
Down Payment (50%): $550,000
Loan Amount: $550,000
Annual Debt Service: $62,782 (Monthly mortgage of $5,231.83 × 12)
Annual Cash Flow: With a 50% down payment, the property generates a positive cash flow of $8,394 per year ($699.50/month), making it a cash flow-positive investment.
Interpretation: While the cash-on-cash return is low (1.53%), it is positive, making this a more stable long-term investment for those considering Seattle real estate investment opportunities.
Gross Rent Multiplier (GRM):
Interpretation: A GRM around 10-12 is common in strong rental markets like Seattle. This indicates a reasonable pricing level, though lower GRM values suggest a better deal.
Debt Service Coverage Ratio (DSCR):
Interpretation: A DSCR above 1.0 indicates the property generates enough income to cover the mortgage. While not ideal (lenders prefer 1.25+), it is significantly better than the previous scenario.
3. Appreciation & Long-Term Equity Growth
Projected Property Value in 5 Years
Interpretation: If Seattle maintains a 6.5% annual appreciation, the property could be worth $1.51M in 5 years—a potential equity gain of $413,232. Investors looking for Bellevue real estate opportunities may also see similar trends in that market.
Final Investment Summary & Considerations
Cap Rate: 6.47% Moderate return for a Seattle rental.
Cash-on-Cash Return: 1.53% Positive but low return.
Gross Rent Multiplier: 12.07 Fairly priced relative to rent.
DSCR: 1.13 Sufficient to cover debt.
5-Year Appreciation: $1.51M (Projected) Strong equity gain potential.
Opportunities
High rental demand: Capitol Hill is a prime Seattle neighborhood with strong tenant interest.
Rent growth potential: With 7.2% annual rent growth, cash flow could increase significantly.
Equity appreciation: Potential $400K+ equity growth in 5 years.
Risks & Considerations
Low cash-on-cash return: At 1.53%, this deal may not be ideal for investors prioritizing immediate high returns.
Interest rate risk: A 7% rate is costly—refinancing at a lower rate later could improve cash flow.
Moderate DSCR: While improved, it may not meet lender requirements for optimal financing terms.
Final Verdict: A Balanced Investment
This Capitol Hill multifamily investment is cash flow positive, making it a more sustainable long-term investment however, requiring a substantial amount down. Whether you are working with Seattle real estate brokers, Seattle real estate agents, Bellevue real estate brokers, or Bellevue real estate agents, this property represents a compelling opportunity for those interested in Seattle and Bellevue real estate investment.
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