Is Federal Way, Washington Good for Airbnb Investment?

To start an Airbnb in Federal Way, Washington, begin by researching local regulations as Federal Way requires short-term rental operators to obtain a business license and comply with zoning restrictions that typically limit rentals to residential zones while prohibiting them in certain single-family neighborhoods. Contact the Federal Way Community Development Department at (253) 835-2400 to verify zoning compliance and obtain necessary permits including a business license ($50-100 annually) and potentially a conditional use permit if required in your zone. Find a suitable property by purchasing or leasing in approved residential areas, ensuring the property meets safety requirements including smoke detectors, carbon monoxide detectors, and adequate egress windows. Furnish the space with quality furniture, linens, kitchen essentials, and amenities while ensuring compliance with Washington State's landlord-tenant laws and Federal Way's property maintenance codes. Create your Airbnb listing with professional photos, competitive pricing (typically $80-150/night in Federal Way), and detailed descriptions highlighting proximity to Seattle (20 miles north) and local attractions. For ongoing management, establish check-in procedures, maintain cleaning protocols, respond promptly to guests, collect and remit Washington State sales tax (10.25% in Federal Way), and ensure compliance with occupancy limits and noise ordinances while maintaining liability insurance coverage of at least $1 million as recommended by most hosting platforms.

To identify profitable short-term rental properties in Federal Way, Washington, focus on locations within 15-20 minutes of Seattle-Tacoma International Airport, near major highways like I-5 and SR-18, and close to attractions such as Wild Waves Theme Park and Dash Point State Park. Target 2-4 bedroom single-family homes or condos built after 1990 with modern amenities, parking, and outdoor spaces, as these appeal to both business travelers and families visiting the region. Analyze pricing by researching comparable STR properties on platforms like Airbnb and VRBO, aiming for properties under $400,000 that can generate $150-250 per night, while calculating occupancy rates of 60-75% annually. Study competition density using AirDNA or Mashvisor to identify underserved neighborhoods, particularly areas near the Commons Mall or Celebration Park where corporate housing demand exists. Utilize tools like BiggerPockets for investment analysis, Zillow for market trends, King County assessor records for property history, and local Facebook groups for Federal Way real estate insights, while ensuring compliance with city regulations that currently allow STRs in residential zones with proper permits and business licenses.

To obtain an Airbnb/STR permit in Federal Way, Washington, you must first contact the Federal Way Community Development Department at City Hall located at 33325 8th Avenue South to determine specific zoning compliance for your property, as short-term rentals are regulated under the city's zoning code. Submit a business license application through the Washington State Business Licensing Service online portal, which costs approximately $19-75 depending on your business structure. Required documents include proof of property ownership or lease agreement with landlord consent, floor plans showing maximum occupancy, proof of liability insurance (minimum $1 million recommended), fire safety inspection certificate from South King Fire & Rescue, and a site plan showing parking availability. You must also obtain a King County health permit if serving food, register for Washington State taxes, and ensure compliance with Federal Way's noise ordinances and parking requirements (typically 1 space per bedroom). The process generally takes 4-8 weeks from application submission to approval, with fees totaling approximately $200-500 including business license, permits, and inspection costs. Federal Way requires STR operators to maintain a 24-hour contact number for complaints, limit occupancy to 2 people per bedroom plus 2 additional guests, and comply with the city's 10 PM-7 AM quiet hours ordinance.

Short-term rentals (STRs) are currently legal in Federal Way, Washington, but operate under specific regulations established by the city. Federal Way requires STR operators to obtain a business license and comply with zoning restrictions that generally limit short-term rentals to certain residential zones while prohibiting them in some single-family neighborhoods. The city has implemented occupancy limits, parking requirements, and noise ordinances that STR operators must follow, along with mandatory registration and periodic inspections. Recent changes around 2022-2023 have strengthened enforcement mechanisms and increased penalties for non-compliance, while also requiring operators to provide emergency contact information and maintain liability insurance. The regulations distinguish between owner-occupied and non-owner-occupied rentals, with stricter requirements for the latter, and certain areas near schools or in specific residential districts may have additional restrictions or complete prohibitions on STR operations.

The most promising Airbnb investment areas in Federal Way, Washington include the Dash Point and Steel Lake neighborhoods, which offer proximity to Puget Sound waterfront activities and Dash Point State Park, attracting tourists seeking outdoor recreation and beach access. The West Campus area near Highline College presents opportunities for academic visitors, parents, and business travelers attending events or meetings at the institution. The Federal Way city center around Commons Mall and the Performing Arts & Event Center draws visitors for shopping, entertainment, and cultural events, while also serving business travelers due to its central location and transit accessibility. The Mirror Lake and Twin Lakes districts are attractive for their scenic residential appeal and proximity to recreational facilities, appealing to families and groups seeking quieter accommodations. Areas near Highway 99 and I-5 corridors, particularly around South 320th Street, offer strategic positioning for travelers needing convenient access to Seattle-Tacoma International Airport (approximately 15 minutes away), Seattle (30 minutes), and Tacoma (20 minutes), making them ideal for business travelers and tourists using Federal Way as a base for exploring the greater Puget Sound region.

In Federal Way, Washington, Airbnb hosts are subject to multiple lodging taxes including Washington State's 6.5% sales tax, King County's 2.5% lodging tax, and Federal Way's local sales tax of 3.1%, totaling approximately 12.1% in combined taxes on short-term rental stays. The Washington State Department of Revenue requires hosts to register for a business license and collect the 6.5% state sales tax plus the 0.3% state B&O tax on gross receipts, with monthly remittance required if annual collections exceed $1,200. King County imposes an additional 2.5% lodging tax on stays under 30 days, collected through the state system, while Federal Way's 3.1% local sales tax is also collected via the state's unified system. Hosts must register with the Washington State Department of Revenue online, obtain a business license, and file returns monthly, quarterly, or annually depending on tax liability volume. Airbnb may collect and remit these taxes automatically for participating hosts through their platform's tax collection service, but hosts remain ultimately responsible for compliance. Exemptions typically apply to stays of 30 days or longer, which are considered long-term rentals rather than transient accommodations, and certain government or nonprofit organization bookings may qualify for exemptions with proper documentation.

To start an Airbnb in Federal Way, Washington, the total costs would be approximately $650,000-$750,000. Property purchase represents the largest expense at around $550,000-$600,000 based on median home prices in the area as of 2023-2024. Furnishing costs typically range from $15,000-$25,000 for a complete 2-3 bedroom home including furniture, bedding, kitchen essentials, and décor. Initial setup costs including professional photography, listing creation, and basic renovations average $3,000-$5,000. Permits and fees in Federal Way include business license ($50-$100), short-term rental permit ($200-$500), and potential HOA approval fees totaling approximately $500-$1,000. Insurance costs for short-term rental coverage run $2,000-$3,500 annually, with the first year requiring upfront payment. Utilities including electricity, gas, water, internet, and cable average $300-$400 monthly or $1,800-$2,400 for six months. First six months operating costs encompass utilities, Airbnb service fees (3% host fee), cleaning supplies, maintenance reserves, marketing, and property management if outsourced, totaling approximately $8,000-$12,000. Additional considerations include potential property taxes, which in King County average 1.2% annually, and ongoing maintenance reserves of 1-2% of property value annually.

Airbnb properties in Federal Way, Washington typically generate annual revenues between $25,000-$45,000 for entire homes and $15,000-$28,000 for private rooms, with average daily rates ranging from $85-$140 depending on property size and amenities. Operating expenses generally consume 40-60% of gross revenue, including cleaning fees ($30-$50 per turnover), property management (10-20% of revenue), utilities ($150-$300 monthly), insurance ($1,200-$2,400 annually), and maintenance costs ($2,000-$4,000 yearly). Net profit margins typically range from 15-35% for well-managed properties, with successful hosts achieving occupancy rates of 65-80% by leveraging Federal Way's proximity to Seattle-Tacoma International Airport and major employment centers like Boeing and Amazon. Properties near Dash Point State Park or with easy I-5 access command premium rates, while hosts who provide airport shuttle services or corporate housing packages often achieve higher profitability. A typical 3-bedroom home purchased for $450,000 with a $2,200 monthly mortgage can generate $3,200-$3,800 in monthly Airbnb revenue during peak seasons, resulting in annual net profits of $8,000-$18,000 after all expenses, making Federal Way a moderately profitable market for short-term rentals compared to Seattle proper.

Airbnb investments in Federal Way, Washington typically generate annual ROI of 8-12% with cash-on-cash returns ranging from 6-10% based on current market conditions. Properties in desirable neighborhoods near Dash Point State Park or close to Seattle-Tacoma International Airport command higher returns, with investors seeing profitability within 18-24 months of initial investment. The Federal Way market benefits from proximity to major employers like Boeing and Amazon, driving consistent demand from business travelers and relocated workers, with average daily rates of $85-120 and occupancy rates of 65-75% annually. Initial investment requirements typically range from $80,000-150,000 for down payments on suitable properties, with gross rental yields averaging 10-14% before expenses, making Federal Way a moderately attractive market for short-term rental investments compared to Seattle proper while offering lower entry costs and steady returns.

STRSearch is a national platform that specializes in identifying profitable short-term rental properties for investors in Federal Way, Washington. Local real estate agents like those at Windermere Real Estate and John L. Scott have experience with investment properties in the Federal Way market. Mashvisor and AirDNA provide data analytics and market insights for Airbnb investments in the area. BiggerPockets connects investors with local professionals and resources. RedAwning offers property management and investment services for short-term rentals. Local agents at Realty One Group and Coldwell Banker Bain serve the Federal Way market with investment property expertise. AvantStay focuses on group rental properties that can be profitable in suburban markets like Federal Way. Vacasa provides property management services for Airbnb hosts in the Pacific Northwest region. Local property management companies like Seattle Oasis Vacation Rentals and HostGenius offer services to maximize rental income. Real estate investment firms such as Roofstock and Arrived Homes have expanded into markets like Federal Way for rental property investments.