Your idea is a great retirement strategy, particularly for those short of savings. That's the broad brush answer.
The hard part is that you might be expecting too much from the move. Let's assume you clear $165,000 from your Seattle home sale and that you spend half of it buying a house for cash. The remaining money, about $82,500, can be invested in liquid assets or in rental real estate. Either way, it will probably only produce enough income to pay the operating expenses on your house.
So the move/downsize strategy will get you a lifetime of shelter without work. But it won't cover your living expenses beyond shelter.
In your shoes, I would be slow to buy additional houses. And I would always keep a portion of my money in cash because a single bad tenant can make a major hole in your cash flow. Indeed, I'd be inclined to keep ALL of the money left after purchasing a house in liquid financial assets. Most people don't appreciate liquidity until they have none, witness all the speculators who assumed they could flip Florida houses.
Scott
