What goes up must come down. That old saw is true of the Seattle area’s housing market. After years of pandemic-fueled growth, high mortgage rates and cooling home prices have forced buyers and sellers alike to take a pause and consider alternatives.
For would-be sellers, this scenario has turned some into accidental landlords.
“The financial incentive to rent outweighs the risk of putting the property on the market with the present economic conditions,” says Bellevue real estate agent Adriano Tori.
In recent weeks, Tori says, he’s had two clients who bought new homes and rented out their old ones.
Steven Bourassa, the director of the Washington Center for Real Estate Research at the University of Washington, agrees that renting now makes sense. “If you don’t need to sell the house, rent it until mortgage rates go down,” Bourassa says.
Not that the rental market is on fire. It’s kind of lukewarm too. In the Seattle metro area, the median asking rent fell 3.2% year over year in April, according to Redfin’s Rental Market Tracker. But for homeowners with equity, renters can still be moneymakers.
Reality check
It sounds good on paper, but is it a good idea on the ground? No one can answer that better than some small landlords and the experts advising them at a May workshop in SeaTac. The workshop was hosted by the Rental Housing Association of Washington, which represented mom-and-pop landlords, most of them with fewer than 20 units and often just one single-family rental house.
In a session that’s equal parts legal seminar and group therapy, members brainstorm how to handle tenants with pets. “You can use DNA tracing to figure out which dog is pooing on the lawn,” one landlord suggested. “I’ve had pets do $10,000 of damage,” another landlord said. His solution, “I will never rent to people with pets again!”
Landlords have seen it all: Tenants who drove a car into their rental house, plumbers who started a gas leak, a neighborhood fight that escalated into a shooting.
That shooting happened in a small Seattle apartment house that Gordon Haggerty lived in and owned in the 1970s. Haggerty sold that building, but he’s still a landlord and still in love with his 1890s’ house with a mansard roof and fish scale shingles that he bought for $30,000 in 1971.
“We had lots of energy and no money. The housing inspectors were nice and gave us a correction plan,” Haggerty recalls.
It took him years to restore the house, one of the first homes built in Seattle’s Eastlake neighborhood. Today, inside the house there are five charming apartments.
“It is a labor of love,” Haggerty says. “I enjoy the joy that our tenants get from living there.”
Know your tenants
How do you find joyful, trustworthy tenants who won’t make you regret your decision to become a landlord?
Ann O’Connell, a real estate attorney and co-author of the book “Every Landlord’s Legal Guide,’ recommends a thorough screening for all tenants.
“My No. 1 rule of thumb is to get applications from every adult who wants to rent your property and pick up the phone and talk to references,” says O’Connell, adding it’s also legal to set a high bar for standards as long as they apply to all applicants.
Prepare your home
Beyond finding the right tenant, you need to protect your property to reduce landlord headaches. This is important, especially if your home has never been rented, to repair anything that needs to be fixed before advertising your property. That broken stair, wonky lock, furnace that’s making death throe noises: Remedy problems before tenants move in.
“You’ve got to treat your property with care,” says Sean Flynn, executive director of RHAWA. “If you don’t, the vulnerable people won’t treat it with care.”
Something that might take some of the sting out of spending money before you’ve seen a rent check, repairs are tax deductible for rentals including $5,000 of startup costs in your first year.
Landlord and renter’s insurance
“My top tip is to get a good landlord insurance policy,” says McKinley Storey, who has a detached accessory dwelling unit in his backyard in West Seattle. “And make sure your tenants get a renter’s insurance policy.”
Landlord insurance protects against liability if a tenant gets injured on your property and can provide rental property owners coverage for wrongful crimes. Renter’s insurance offers coverage for a tenant’s possessions like furniture and jewelry.
Consider a property manager
If you can’t stomach midnight phone calls about a leaking dishwasher or that funny gas smell in the basement, a full-service property manager might be the solution. They usually charge between 3% and 12% of the monthly rent. Some property managers operate in a more a la carte fashion — for example, charging a fee to find a tenant for your house.
A Yelp search will demonstrate that there’s no love lost between many landlords and their managers, so research managers thoroughly. “No one will manage your property like you will, and no one will be as careful or as attentive as the owner,” cautions Seattle Windermere real estate agent Marlow Harris.
Learn Seattle regulations
Seattle has gone above and beyond in introducing laws that ensure fair access to housing, but for some landlords, navigating these regulations can be dizzying.
“No city has gone as far as Seattle to regulate rentals,” says O’Connell. She ticks off laws that require landlords to offer their rental to the first qualified candidate, requires landlords to rent to family members of tenants even if the relatives don’t meet the owner’s criteria, prohibits landlords from refusing to rent to someone based on criminal records .
Asked for comment, a spokesperson for the Seattle Department of Construction and Inspections said the City Council created legislation to “ensure tenants have fair access to available rental housing.”
The ordinances may be having unintended consequences. According to the city’s data of registered rentals, between July 2018 and August 2022, landlords who owned 20 units or fewer pulled more than 11,000 rental homes off the market.
Since more than 2,400 of those registered rentals were one-unit properties, the good news is that if you decide to rent your single-family home in Seattle, there will be plenty of demand.
Delaney Wysingle, a Black landlord with two single-family rentals in Beacon Hill, says he’s always been fair with tenants. But he worries that one problem tenant could ruin him. “The City Council is picking up stuff to make it more challenging to rent in Seattle.”
Wysingle has two pieces of advice for people thinking about renting their house in Seattle. “Don’t do it.” But if you do, join RHAWA. “If it wasn’t for them and I had to hire an attorney every time I had a question about the laws, I couldn’t afford to rent the places,” Wysingle says. It costs $250 a year to join and includes access to forms like leases.
And speaking of costs, remember that as a home owner, you’re still on the hook for mortgage payments, property taxes and upkeep.
“Anytime you work on a house, nothing is cheap, and all of this falls in the landlord’s lap,” Wysingle says.
Community joy
Despite all the costs and things that can go wrong for landlords, Flynn, who owns rentals in addition to his role with RHAWA, says offering safe, affordable housing is a vital community service. And most of the time, he says the tenant-landlord relationship is amicable. Sometimes, you can even be part of a wedding. “Two of my tenants married each other and asked me to officiate at the wedding,” says Flynn.
Longtime landlord Haggerty has a similar heartwarming story. When a tenant couple decided to tie the knot, they had the ceremony in the yard of his Eastlake house.
“I was delighted to set up a tent and things like that for the wedding,” Haggerty says. “It did a lot for our apartment community. It fostered a good community vibe.”
