Washington Property Taxes and Insurance in the DSCR Calculation

No income tax, real property tax

Washington has no state income tax, but property taxes are substantial. The statewide median real estate taxes paid is $4,729 a year, and the medians run from $3,307 in Spokane to $7,503 in Seattle and $9,988 in Bellevue (ACS 2024; general market benchmark, not a loan offer).

Those medians are useful for orientation and useless for underwriting. A lender will use the tax bill or a tax estimate for the exact parcel, and so should you.

How to estimate the tax bill for a specific property

Washington property tax is the assessed value multiplied by the combined levy of every taxing district that covers the parcel: state school levy, county, city, school district, fire district, library, port and others. Two houses a few miles apart can sit in different districts with different levies.

• Look up the parcel on the county assessor’s site (King, Pierce, Snohomish, Spokane, Clark, Benton, Franklin, Thurston and every other county publishes online)
• Note the current assessed value and the levy code or tax area for the parcel
• Remember that a recent sale price can lead to a higher assessed value at the next revaluation
• If the seller received a senior or disability exemption, do not use their bill; you will not inherit it
• Voter-approved levies can change the rate from year to year, so check the most recent bill

Landlord insurance: start with a real quote

A landlord policy, sometimes called a dwelling fire policy, is different from a homeowner policy and usually costs more. The lender will require coverage that meets its standards, and the premium goes into the ratio monthly. Get a quote before you finalize your offer, not after the appraisal.

Western Washington underwriters focus on earthquake exposure, older housing stock and water damage. They ask about roof age, electrical panels, plumbing material and seismic retrofits on older homes. Eastern Washington and the Cascade foothills bring wildfire scrutiny, and some carriers price or limit coverage in high-exposure areas. Winter freeze and snow load matter in Spokane and the mountains.

Earthquake coverage

Standard landlord policies generally exclude earthquake damage, so earthquake coverage is usually a separate policy or endorsement. Whether to carry it is a business decision, and lenders set their own requirements. Many Puget Sound investors carry it, especially on older unreinforced or unretrofitted buildings. If you do, add the premium to the insurance line in the calculator so your ratio reflects the true cost of holding the property.

Flood zones

River-adjacent and coastal properties may fall in a FEMA special flood hazard area, which typically triggers a flood insurance requirement. Check the FEMA Flood Map Service Center for the address early. The Puyallup, Snohomish, Skagit, Columbia and Chehalis river valleys and low-lying shoreline areas are places where this comes up. Flood premiums can be large enough to change a close ratio.

Condo master policies and dues

For a condo, the association’s master policy covers the building, and you carry a unit policy for interiors and liability. The dues fund the master policy, reserves and shared costs, and they go straight into the PITIA. A unit with a low price can underperform one with a higher price if its dues are high or a special assessment is coming.

Ask the association for its budget, reserve study, master policy declarations and the lender questionnaire. Lenders review the project, and a building that fails review cannot be financed on that program regardless of the ratio.

Putting it together in the calculator

Once you have the assessor’s tax estimate, a landlord quote (with or without earthquake coverage, your choice made deliberately), any flood premium and the HOA dues, enter them in the calculator as yearly taxes, yearly insurance and monthly dues. Add the rent you can document and a rate quote you actually received. The result is a ratio built on the same inputs a lender will use, which is the only ratio worth bringing to a financing conversation.

Renewals and the long view

The DSCR at closing uses this year’s tax bill and this year’s premium, but you will own the property through many renewals. Washington levies can rise when voters approve new school or fire measures, and insurance renewals in the region have moved more than rents in some years. Because the statewide cap limits how fast rent can rise, a property with a thin margin today can tighten over time if costs outpace rent. Build a cushion, review the policy at every renewal and appeal an assessment you believe is too high through the county board of equalization.

Common estimating mistakes

Most ratio surprises in Washington come from the same handful of errors. Investors use the seller’s tax bill even though the seller had a senior exemption or an old assessed value. They plug in a homeowner insurance premium instead of a landlord quote. They forget the condo special assessment the board approved last spring, or assume earthquake coverage is included when it is not. Each mistake makes the ratio look better than the lender will find it.

The fix is simple and slightly tedious: get documents, not estimates. A parcel printout from the assessor, a written landlord quote, the HOA statement and, where relevant, a flood determination. With those in hand, your calculator ratio and the lender’s ratio should be close.

Frequently asked questions