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 not just downtown. It’s an excellent entry point to the market. The pendulum is always moving, and during the urban exodus of COVID, 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. Unless you’re a dual income household, or making an extraordinary amount of money, they’re still elusive.
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 up 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, as well as a great store of value.
Recently, I’ve helped clients close on four condo purchases. 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, so they’re buying condos. Your broker can walk you through the ownership nuances, since the approach different from single-family homes. Another alternative to condos are co-ops, which offer a much lower price point, 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 of their workers 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 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, especially with condos, since these appreciate differently than single family homes. Your broker will also help you navigate and assess the health of the building/complex, 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.
Tips for millennials exploring a condo purchase:
• Make a 3-5-year plan. 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, and 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 your agent representing you, it’s much easier to learn about a building’s health (e.g. lawsuits or special assessments), rules and regulations, hidden fees, and condition/care of a building.
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