People often ask how much they can save on taxes through depreciation when purchasing an investment property. This question frequently arises among those considering their first investment in Federal Way. While depreciation is a tax-related area that should be confirmed with an accountant, there are numbers to consider before looking at depreciation when buying an investment property.

The rental prices in Federal Way are $1,515 per month for a one-bedroom and $1,837 per month for a two-bedroom (source: Zumper, as of August 20, 2026). The one-bedroom has decreased by 7 percent compared to the previous year, while the two-bedroom has dropped by 6 percent. The median rent across all property types is around $1,835, which also shows a decline from a year ago. This suggests that while the entry prices are lower than in Seattle or Bellevue, the potential for rent increases is relatively limited.

Applying the 1% rule, which looks at the monthly rent as a percentage of the purchase price, indicates that it is relatively easier to meet this criterion in areas with lower entry prices. However, loan conditions apply uniformly regardless of the area. A down payment of 15 to 25 percent is required, and a credit score of at least 620 is necessary to qualify for a loan, with a score above 740 being advantageous for interest rates. Interest rates are also set 0.5 to 0.75 percentage points higher than for owner-occupied properties (source: Fannie Mae, Freddie Mac investment property loan guidelines).

When considering rental income for loan approval, only 75 percent of the expected rent is recognized as income. Documentation such as the lease agreement or the rent schedule from an appraisal is required as supporting evidence. The remaining 25 percent can be viewed as a buffer for vacancies or unexpected expenses.

Washington State is implementing a new rental regulation law, HB 1217, starting May 7, 2025. This law broadly addresses rent and fee increases, notification procedures, and security deposit limits (source: Washington State Legislature bill summary). Specific caps on increase rates and exceptions are still being finalized, so if you are about to enter a rental agreement, it is advisable to check the latest information with your property management company or attorney.

Property taxes in Federal Way are approximately 0.82 percent of the home value based on King County (source: smartasset.com). Given the lower entry prices, the absolute amount of property tax is also generally lower than in Bellevue or Seattle.

If you hire a property management company, the fee typically ranges from 8 to 12 percent of the monthly rent. Landlord insurance is generally more expensive than standard homeowners insurance due to broader coverage. The industry standard is to set aside about 1 percent of the asset value annually for maintenance costs.

Comparing properties using the cap rate, which is calculated by dividing net operating income by the purchase price, is also a common practice. Net operating income is the amount left after deducting property taxes, insurance, management fees, and vacancy losses from the rent. In areas like Federal Way with lower entry prices, cap rates tend to be relatively high, indicating a market that may appeal to investors who prioritize monthly cash flow over capital appreciation. However, this does not mean it is always advantageous. Given the significant drop in rents compared to other areas, the potential for longer vacancy periods should also be considered.

If you are coming from another state, it is advisable not to estimate property taxes or insurance based on your previous location, as calculation methods vary by region. For those who have just immigrated from Korea, deciding whether to start with renting or to purchase immediately for investment and residence can be challenging. Consulting with immigration experts and tax advisors is recommended, as visa status and tax residency can affect your situation.

Federal Way is also one of the areas where Korean families check school districts. While you can refer to GreatSchools or Niche for school ratings, it is important to verify the assigned school directly before purchasing, as boundaries frequently change. If you plan to reinvest the tax savings from depreciation into another investment property, you can defer capital gains tax through a 1031 exchange (source: irs.gov). This article does not constitute investment, tax, or legal advice, and it is recommended to consult with an accountant and real estate professional before finalizing any contracts.