Thinking about a Downtown Seattle condo as an investment or a landing pad while you relocate? If so, you are smart to look beyond list price and views. The numbers that matter most live inside the HOA budget, the building’s rental rules, and realistic vacancy and absorption trends. In this guide, you will learn the key metrics that shape returns, how to read them, and what to request before you write an offer. Let’s dive in.
Why downtown condos appeal
Downtown Seattle offers walkability, amenities, and proximity to major employers. Condos can be lower maintenance compared to single-family homes. If you are relocating, a condo can be a comfortable base while you learn the region. For investors, the appeal is clear, but returns depend on disciplined underwriting.
Start with HOA dues and reserves
HOA dues are a recurring, non-negotiable cost. In high-rise buildings with amenities and on-site staff, dues can be significant. They usually cover building insurance, common-area utilities and maintenance, elevator and mechanical systems, parking and amenity upkeep, and reserve contributions.
Key steps:
- Request the current budget, most recent financial statements, and the latest reserve study.
- Ask for a 12–24 month run of meeting minutes to spot planned projects, litigation, or rule changes.
- Confirm any recent or pending special assessments, the amount, and who pays them if you buy.
How to evaluate dues vs. rent:
- Calculate dues as both dollars per month and as a percent of expected gross rent. A small shift here can materially change NOI.
- Use this quick check: HOA as percent of rent = monthly HOA dues ÷ monthly market rent.
Reserve health signals:
- Look for adequate reserves and a plan that matches the reserve study.
- Red flags include depleted reserves, repeat special assessments, noted deferred maintenance, and a high share of owners in arrears on dues.
- A practical metric is reserve fund balance per unit and how it aligns with the remaining useful life of major systems noted in the reserve study.
Read the rental rules early
Never assume a unit is freely rentable. Building governing documents control what you can do and for how long.
What to review:
- CC&Rs, bylaws, and house rules for rental caps, minimum lease terms, waiting periods after purchase, and tenant approval steps.
- Any short-term rental provisions. Many associations prohibit short stays even if the city permits them.
- Recent owner communications about rental policy changes or enforcement.
Local context to verify:
- Short-term rentals in Seattle require registration and compliance with city tax and licensing rules. The association can still prohibit them even if the city allows them.
- Seattle has local landlord-tenant protections that may exceed state rules. Confirm notice periods, fees, and any new ordinances before you model income.
Vacancy and absorption context
Vacancy is the share of units available for lease. Absorption is the pace at which the market leases or sells available units. In downtown Seattle, these trends are sensitive to employment, office occupancy, new supply, and seasonality.
What drives demand:
- Employment trends, especially in tech and health care.
- New condo inventory and competition from new rental apartments or office conversions.
- Seasonality, with leasing activity often stronger in spring and summer.
- Short-term demand depends on tourism and is constrained by city and building rules.
Setting conservative inputs:
- Use a vacancy factor that reflects downtown conditions and your building type.
- Illustrative ranges to test: 4–8% vacancy for stable-demand buildings and 8–15% where demand is softer or new supply is competing. Update with current local data before you commit.
Model cap rate the right way
Cap rate and cash flow hinge on getting NOI right. Include every operating expense, especially HOA dues.
Core formulas:
- Effective Gross Income (EGI) = Potential Gross Rent − Vacancy and Collection Loss + Other Income.
- Net Operating Income (NOI) = EGI − Operating Expenses (excludes mortgage principal and interest).
- Cap Rate = NOI ÷ Purchase Price.
- Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Cash Invested.
Do not skip these expense lines:
- HOA dues.
- Property taxes. In King County, taxes often run around 1% of assessed value plus voter-approved levies. Confirm the current rate for the parcel.
- Insurance for the unit, even if the building has a master policy.
- Utilities you pay, if any.
- Maintenance and reserves for unit-level items and expected assessments.
- Management fees, often 6–10% of collected rents for long-term leasing.
- Vacancy and credit loss.
Step-by-step approach:
- Estimate market rent for the exact unit type using building comps.
- Apply a conservative vacancy and collection loss factor.
- Subtract all recurring operating expenses, including HOA dues and taxes, to get NOI.
- Divide NOI by your expected purchase price to get cap rate.
- Add financing to test cash-on-cash returns, using current rates and down payment assumptions.
- Run sensitivities that vary rent, dues, vacancy, and cap rates to see your risk band.
Illustrative example only:
- Assumptions: 1-bed purchase at $550,000. Market rent $2,500 per month.
- Monthly expenses: HOA $600; property tax $550; insurance $75; management 8% of rent = $200; maintenance/reserves $150; vacancy 5% = $125. Total monthly operating expenses about $1,700.
- Annualized: Gross rent $30,000; EGI after 5% vacancy $28,500; annual operating expenses about $20,400; NOI about $8,100.
- Cap rate: $8,100 ÷ $550,000 ≈ 1.47%.
Interpretation: With downtown HOA dues and taxes, condo cap rates can be low compared to purpose-built rentals. Investors often rely on conservative financing, appreciation, or other income like parking (if allowed) to strengthen returns. Always test multiple scenarios.
Sensitivity and financing effects
Leverage can improve cash-on-cash returns if income covers debt service, but it also increases risk. Stress-test your model by moving each input:
- Rent ±10–20% to reflect market swings and seasonality.
- HOA dues ±10–25% to reflect annual budget changes.
- Vacancy 4–10% to capture demand shifts.
- Interest rate ±50–100 basis points to see payment impact.
A simple best, likely, and conservative set of cases will quickly show whether the investment holds up.
Due diligence checklist
Request these documents before you offer or during your contingency period:
- Full HOA resale packet: CC&Rs, bylaws, rules, current budget, recent financials, reserve study, insurance declarations, and 12–24 months of meeting minutes.
- Special assessment disclosures and capital project schedules, including elevators, façade, and major mechanical systems.
- Litigation disclosures involving the HOA.
- Building rental snapshot: current rental cap, number of leased units, and any owner-occupancy requirements.
- Seller’s rent roll or rental history, if applicable.
- Unit utility bills for the last 12 months and parking or storage agreements.
- King County tax history and assessed value for the parcel.
- Comparable rents and current vacancy data for the building and nearby units.
- City and county rules for short-term rentals and landlord-tenant requirements, if relevant.
- Any available building inspection reports and pest or structural disclosures.
Operational confirmations:
- Whether the HOA requires board approval for tenants and how long approval takes.
- Minimum lease terms and any STR bans.
- Insurance coverage and any special assessment cost-sharing for deductibles.
- Lease assignment or subletting restrictions.
Professionals to consult:
- A real estate attorney with Washington condo experience.
- A local CPA or tax advisor for property and income tax impacts.
- An experienced local broker or property manager who knows downtown condo leasing.
- A reserve study specialist if reserve health is unclear.
How we help you invest well
You deserve a concise, data-driven process. Here is what a disciplined approach looks like with a senior advisor in your corner:
- Filter inventory to rental-friendly buildings with healthy reserve signals and HOA dues within your threshold.
- Request and review the HOA packet and resale certificate early, so deal-killers surface before you fall in love with the view.
- Order a building-specific rent survey and match it to your unit type and finish level.
- Build a three-scenario model that shows NOI, cap rate, and levered cash-on-cash using building-specific dues and current taxes.
- Coordinate legal and tax reviews to protect your position.
- If you are relocating, align timing, temporary housing needs, and closing logistics so your move is smooth.
When you are ready to see curated options and run the numbers with confidence, connect with John Thompson for a focused consultation.
FAQs
What HOA dues should I expect for Downtown Seattle condos?
- Dues vary widely by building and amenities, from several hundred to over a thousand dollars per month; judge them as a percent of expected rent and confirm reserve contributions in the HOA budget.
Can I operate a short-term rental in a Downtown Seattle condo?
- Many associations prohibit short stays and the city requires registration and compliance, so verify both the condo’s CC&Rs and Seattle’s rules before assuming STR income.
How do reserves affect my investment risk and returns?
- Low reserves and repeated special assessments increase risk and can reduce NOI; review the reserve study, balance per unit, and upcoming projects before offering.
What vacancy rate should I use when modeling a Downtown Seattle unit?
- Test conservative ranges such as 4–8% for stable-demand buildings and 8–15% where demand is softer or new supply competes, then update with current local data.
Why are downtown condo cap rates often lower than apartments?
- HOA dues and property taxes are meaningful fixed costs that compress NOI; run multiple scenarios and consider financing and appreciation as parts of your return.
How long will it take to lease my condo in Downtown Seattle?
- Time-to-lease depends on seasonality, building demand, and whether the unit is furnished; use local comps and recent building performance to set expectations.
