Light Rail Creating New Investment Opportunities

Back in June we wrote an article discussing light rail developments in Seattle. We’re back with updates on those developments and how they are affecting property values in Northgate, Ballard, and West Seattle.

Northgate Developments

Large updates are under construction at Northgate Mall – the final stop for the Northgate Light Rail Extension. The mall renovations will include two hotels, four office buildings, four mixed-use residential buildings, a central park, and NHL Seattle’s new Ice Centre – serving as both a practice center for Seattle’s professional team and a public rink. The Ice Centre is scheduled to open in 2021, the same year the Northgate Link is estimated to be complete. Since the initial mention of the mall development back in March of 2018, the median sales price of residential listings for the Northgate area has increased from $650,000 to $680,000, a 4.6% market increase, according to MLS reports. This may not look significant, but keep in mind this occurred despite market hardships in 2018. While there may be many factors contributing to this growth, the mall’s potential for increasing economic growth, and the light rail’s likelihood of bringing more commuters to the area could create opportunities for real estate investors.

West Seattle and Ballard Extension

Plans for the Ballard and West Seattle Light Rail extensions are still in the making. According to the Seattle Times, both regions are advocating for routes that include tunnel options. This would require more funding and extend timelines; West Seattle is estimated to be complete sometime after 2030 and Ballard in 2035. On the other hand, tunnel options would allow the rail to serve an estimated 87,000 passengers between both regions without destroying existing homes and retail fronts. The new rail system will make access to both cities easier, potentially driving economic growth and market value in these areas.

Upzoning In Northgate, West Seattle, and Ballard

In addition to light rail developments, these neighborhoods were included in recent upzoning changes. The new zoning legislation allows for larger apartment and commercial buildings, as well as add-ons to residential homes. This creates a great opportunity for new investors to utilize additional dwelling units to subsidize mortgage payments.

Need help with additional dwelling units in your home? Check out our Construction 101 series.

Opportunity Zones

Both Northgate and West Seattle also contain opportunity zones: areas that qualify for opportunity fund investments. Investors can defer tax payments on their capital gains up until Dec. 31, 2026, when they roll the profit from their real estate investment into these opportunity funds.  What’s more, they may also receive a tax discount depending on how long they hold on to the opportunity fund. Investments between 5-7 years receive a 10% reduction of tax liabilities on the initial gain. Investments between 7-10 years receive a 15% reduction. Those lasting over 10 years receive the biggest benefit: deferred payment of the original gain + 15% reduction on liabilities and exemption from tax liabilities on any capital gains from the opportunity fund investment.

What Qualifies As An Opportunity Fund?

According to the IRS “a qualified opportunity fund is an investment vehicle that is set up as either a partnership or corporation for investing in eligible property that is located in a Qualified Opportunity Zone.”

Many people think you have to live in an opportunity zone in order to invest in an opportunity fund but that is not the case. You simply have to invest the full portion of your capital gain into a qualified opportunity fund and elect to defer the tax on that gain, in order to qualify for the tax benefits. For more information about opportunity zones, opportunity funds, qualifications, and a map of Washington’s opportunity zones visit the Department of Commerce webpage.

Learn more about opportunity zones at Investor 101!

Looking to invest in Ballard, West Seattle, or Northgate? Contact our team today and let us help you get started!

Jon Winney
jwinney@heatondainard.com
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