Originally Featured on Geekwire
Even in one of the most competitive residential real estate markets anywhere, there’s still hope for you, fellow millennials! Those white-picket-fence dreams may need to hold, but an excellent and often overlooked opportunity for wealth-building is in the purchase of a condominium. This might be your residence for just a few years, but when you make your next move, rather than selling, keep it as a rental investment to fast-track your wealth-building legacy. The time is right, and the value is out there.
The condo market is still attainable for most millennials and is an excellent entry point to the market. The pendulum is always swinging. During the urban exodus of COVID, when people craved space and outdoors in isolation, the pendulum swung heavily toward single-family home sales. Even on the edges of Seattle, inventory dwindled, and prices soared. They're still elusive unless you’re in a dual-income household or making a great salary.
Millennials represent the largest demographic currently buying residential real estate, yet they’re finding that budgets and desires don’t always match up. Consider an $800,000 townhouse. You may get 1,000 to 1,300 square feet, but it’s split into three levels at 350 square feet each. That’s not a lot of room to entertain friends, for example. While a 750-square-foot condo might seem smaller on paper, being all on one level can make it feel larger than the townhouse, in addition to being more affordable. While townhouses lend themselves better to house-hacking – renting out a spare room or den to a roommate to help cover the mortgage – this strategy can also be employed with a condo.
The Federal Reserve recently announced inflation-curbing changes that are already elevating home mortgage interest rates, and they won’t be lowering anytime soon. Considering area condo sales have remained flat during COVID, millennials are well-poised to buy condos as future rental properties. With a volatile stock market and a devaluing dollar, real estate remains the strongest wealth-building tool at your disposal and a great store of value.
Downtown Seattle is awakening from its COVID slumber - it’s where young professionals want to be. Many Seattle tech workers recognize they can buy a condo and pay just a little more on a mortgage payment than monthly rent. A trusted real estate broker can walk you through the ownership nuances since the approach is different from single-family homes. Another alternative to condos are co-ops, which offer a much lower price point and are generally in older buildings, but allow you to live in a desirable location.
Large regional employers, such as Amazon, Google, Microsoft, and Expedia recently announced at least partial-work week returns to the office; commutes are back. The convenience of a walkable community--with proximal work, living, and retail--is always attractive, but your first condo doesn’t need to be right downtown to be a savvy investment. Look at the present light rail corridors; Mountlake Terrace and Lynnwood, for example, are thriving communities in the northern reaches of the Seattle metro. They’re near transit, offer value, and are extremely promising as future rentals.
Living in a condo for three to five years – and then renting it out later—is a means of establishing equity and a great first step toward earning passive income. A qualified real estate broker will help guide you through the process, as it’s much easier to learn about a building’s rules and regulations and hidden fees. Your broker will also help you navigate and assess the building’s health (e.g., lawsuits or special assessments), which is just as important as the individual unit, so shop wisely. By buying creatively with a condo, you take a path with plenty of upside for your financial future.
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Cyrus Fiene lives in Seattle and is founder of his team, Cyrus Fiene Team, part of Coldwell Banker Bain. Fiene’s pulse on regional condominium momentum and his understanding of the millennial market contributed to award as a Coldwell Banker International “30 Under 30” in both 2021 and 2018. Coldwell Banker Bain is the #1 Coldwell Banker affiliate globally with more than $8 billion in volume in 2021, helping people buy and sell homes in the Pacific Northwest since 1972.
SEPARATE BREAK-OUT BOX?
Tips for millennials exploring a condo purchase:
· Make a 3-5-year plan. For any real estate you buy you should have a minimum 3-5 year expectation of what your life is going to look like, how the property will fit into your life.
· Hold onto a property you purchased after you move on. Rent it out to build wealth.
· Downtown condos are one option since they’re near many large employers, but other attractive areas are those along North-South light rail corridors within King County.
· Beware of lawsuits and special assessments on the building itself—which can make a unit very difficult to sell (unless you have a cash buyer). With an agent representing you, learn about a building’s health (e.g., lawsuits or special assessments), rules and regulations, hidden fees, and condition/care of a building.