How would you start out given my current situation?
Location: Washington, DC (Nearby Tyson's Corner due to work location)
Status: Single. No debt. Sitting on a pile of savings.
Goals: 1) Move out of the, 2) generate steady rental income even if I move out of the place a few years later.
With the savings that I have, strategy-wise, I can think of purchasing a 2bd, 2ba condos or a townhouse (Albeit further from my preferred location) and rent out one of the rooms. Alternatively, I could buy two small condos (1bd, 1ba) and rent out one units.
The thing that gets me is the condo HOA fee. After HOA and taxes, there is very little in return, certainly not enough to cover my personal expenses let along replacing job income (Ultimate goal). I wonder how the experts on this board get around this problem? Or a better approach that I am not aware of?
Quote from @Andrew L.:
Location: Washington, DC (Nearby Tyson's Corner due to work location)
Status: Single. No debt. Sitting on a pile of savings.
Goals: 1) Move out of the, 2) generate steady rental income even if I move out of the place a few years later.
With the savings that I have, strategy-wise, I can think of purchasing a 2bd, 2ba condos or a townhouse (Albeit further from my preferred location) and rent out one of the rooms. Alternatively, I could buy two small condos (1bd, 1ba) and rent out one units.
The thing that gets me is the condo HOA fee. After HOA and taxes, there is very little in return, certainly not enough to cover my personal expenses let along replacing job income (Ultimate goal). I wonder how the experts on this board get around this problem? Or a better approach that I am not aware of?
If you invest in D.C. area you are banking on appreciation of the property and rent growth, it’s basically impossible to find positive cash flow in our main core, as you go farther out from the city you can maybe break even or make a little. That’s not to say you shouldn’t invest in this area it’s one of the fastest appreciating and safest markets in the country! but you trade cash flow for that.
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Quote from @Andrew L.:
You have to consider all expenses. HOA fees can sometimes push you into a negative cashflow. Also remember that HOA fees will never go down and the quality of the HOA can heavily impact your property value. I prefer to stay away from them.
You may also find properties that seem like strong investments but then the taxes, insurance, or even utility expenses throw it into a negative.
@Andrew L. it depends what area you want/need to live in.
The best purchase you can go with is a multifamily in DC. After that a rowhouse in DC especially if it has the ability to have an ADU. Condos in the city are beaten down in price currently, and you can get some good buys on them...but condos typically will not appreciate as much as other assets.
Id also focus on learning how to think 4 dimensionally instead of 2 dimensionally. What that means is focusing on how the asset performs over the course of time and not merely focusing on the here and now. If you buy something in a location with high rent growth, a property that doesnt make much money, or even loses money today if you are highly leveraged could be a cash cow with the passage of time. I have multiple properties in the area that were merely break even when I purchased that cash flow thousands of dollars a month each today.
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I agree with Russell. See if you can house hack a four unit in DC. That’s the best bang for your buck. We own three condos in Arlington and it has been a long road for appreciation comparatively speaking. Plus the condo fees are no joke. They go up every year.
Quote from @Russell Brazil:
@Andrew L. it depends what area you want/need to live in.
The best purchase you can go with is a multifamily in DC. After that a rowhouse in DC especially if it has the ability to have an ADU. Condos in the city are beaten down in price currently, and you can get some good buys on them...but condos typically will not appreciate as much as other assets.
Id also focus on learning how to think 4 dimensionally instead of 2 dimensionally. What that means is focusing on how the asset performs over the course of time and not merely focusing on the here and now. If you buy something in a location with high rent growth, a property that doesnt make much money, or even loses money today if you are highly leveraged could be a cash cow with the passage of time. I have multiple properties in the area that were merely break even when I purchased that cash flow thousands of dollars a month each today.
Given the current high rate, I'd prefer not to take out a mortgage, or very little of it. Hence why a multifamily is pretty much out of question for me. I assume the reason the properties turned from a breakeven to a cash cow is due to loan payoff?
Quote from @Andrew L.:
Quote from @Russell Brazil:
@Andrew L. it depends what area you want/need to live in.
The best purchase you can go with is a multifamily in DC. After that a rowhouse in DC especially if it has the ability to have an ADU. Condos in the city are beaten down in price currently, and you can get some good buys on them...but condos typically will not appreciate as much as other assets.
Id also focus on learning how to think 4 dimensionally instead of 2 dimensionally. What that means is focusing on how the asset performs over the course of time and not merely focusing on the here and now. If you buy something in a location with high rent growth, a property that doesnt make much money, or even loses money today if you are highly leveraged could be a cash cow with the passage of time. I have multiple properties in the area that were merely break even when I purchased that cash flow thousands of dollars a month each today.
Given the current high rate, I'd prefer not to take out a mortgage, or very little of it. Hence why a multifamily is pretty much out of question for me. I assume the reason the properties turned from a breakeven to a cash cow is due to loan payoff?
Frankly real estate is not a worthwhile investment without being leveraged. At a standard 4-1 leveraged position (20% down, 80% loan) you will typically end up with an internal rate of return of around 20%. Unleveraged, you would be look at an IRR that trails the stock market.
The reason properties turn into cash cows with time is because of rent growth.
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Real Estate Agent Pennsylvania (#SBR005765 ), West Virginia (#WVA230040225), District of Columbia (#BR200201381), Maryland (#648402), Virginia (#0225219736), and Delaware (#RA-0031082)
- (301) 893-4635
- http://www.DistrictInvest.com
- [email protected]
- Podcast Guest on Show #192
Quote from @Jack Seiden:
Quote from @Andrew L.:
Location: Washington, DC (Nearby Tyson's Corner due to work location)
Status: Single. No debt. Sitting on a pile of savings.
Goals: 1) Move out of the, 2) generate steady rental income even if I move out of the place a few years later.
With the savings that I have, strategy-wise, I can think of purchasing a 2bd, 2ba condos or a townhouse (Albeit further from my preferred location) and rent out one of the rooms. Alternatively, I could buy two small condos (1bd, 1ba) and rent out one units.
The thing that gets me is the condo HOA fee. After HOA and taxes, there is very little in return, certainly not enough to cover my personal expenses let along replacing job income (Ultimate goal). I wonder how the experts on this board get around this problem? Or a better approach that I am not aware of?
If you invest in D.C. area you are banking on appreciation of the property and rent growth, it’s basically impossible to find positive cash flow in our main core, as you go farther out from the city you can maybe break even or make a little. That’s not to say you shouldn’t invest in this area it’s one of the fastest appreciating and safest markets in the country! but you trade cash flow for that.
How much farther out from the city do I need to go? Are we talking Reston/Chantilly, or much further out?
I am 44 and killing myself for not buying more properties in DC after I purchased my first 4 unit in 2010. Buy something that you can house hack (roommate). Then every year keep buying another place. Even if you are cash flow negative by a few hundred dollars, over 10 years the appreciation will far surpass your negative cash flow and rents will catch up eventually. Work on increasing your income/career instead of fantasizing about quitting your job. More money you make more cushion for real estate. Good luck!!
My two cents:
Man, if you are young and single with cash, just enjoy your life, and sign great deals from turnkey providers. That's what I do.
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can you say more about your situation? do you own or rent now? how much is your pile? are you pre-approved for any financing?
it's possible to house hack in the DC metro area, it's just more difficult and more expensive than in many other markets as @Russell Brazil alluded to
for example, you could try to find a multi in DC (there aren't very many) or maybe a single family home in a place like herndon or springfield with a basement that you could live in, and rent out the house.
going to be really tough and really expensive... but if it were cheap and easy, wouldn't everyone do it? =)
if you buy random condos off the MLS then yes, they won't cash flow.
or, you could get really creative, and BRRRR or live in flip something further out - like frederick md, or fredericksburg va
how much elbow grease are you willing to put in?
good luck
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Good morning, pick up a townhome in ashburn and rent a room out
Quote from @Nicholas L.:
can you say more about your situation? do you own or rent now? how much is your pile? are you pre-approved for any financing?
it's possible to house hack in the DC metro area, it's just more difficult and more expensive than in many other markets as @Russell Brazil alluded to
for example, you could try to find a multi in DC (there aren't very many) or maybe a single family home in a place like herndon or springfield with a basement that you could live in, and rent out the house.
going to be really tough and really expensive... but if it were cheap and easy, wouldn't everyone do it? =)
if you buy random condos off the MLS then yes, they won't cash flow.
or, you could get really creative, and BRRRR or live in flip something further out - like frederick md, or fredericksburg va
how much elbow grease are you willing to put in?
good luck
Very busy with the current job so as little elbow grease as possible.
I need to move out of the current place so whatever I purchase will be for myself too.
$500k - $600k in savings (not touching retirement funds).
So condos are probably out of the question. Part of me wants a single-family house but that also means I will exhaust all my savings and take out a mortgage.
Quote from @Andrew L.:
Quote from @Nicholas L.:
can you say more about your situation? do you own or rent now? how much is your pile? are you pre-approved for any financing?
it's possible to house hack in the DC metro area, it's just more difficult and more expensive than in many other markets as @Russell Brazil alluded to
for example, you could try to find a multi in DC (there aren't very many) or maybe a single family home in a place like herndon or springfield with a basement that you could live in, and rent out the house.
going to be really tough and really expensive... but if it were cheap and easy, wouldn't everyone do it? =)
if you buy random condos off the MLS then yes, they won't cash flow.
or, you could get really creative, and BRRRR or live in flip something further out - like frederick md, or fredericksburg va
how much elbow grease are you willing to put in?
good luck
Very busy with the current job so as little elbow grease as possible.
I need to move out of the current place so whatever I purchase will be for myself too.
$500k - $600k in savings (not touching retirement funds).
So condos are probably out of the question. Part of me wants a single-family house but that also means I will exhaust all my savings and take out a mortgage.
I would highly recommend taking out the mortgage and buying a single family or multifamily home. Condos often do not cash flow due to the HOA fees and tighter restrictions on the use of the property. With the amount of you have in savings its feasible for you to house hack a turnkey multifamily in DC and can likely buy down the rate/pay points to lower your monthly payment (if thats what you want to do). If you put down enough money and rent the other unit youll be able to live very affordably in an asset that will appreciate exponentially more than a condo. Being young -- this will also put you in a fun location you want while giving you the long term appreciation that DC has to offer.
I stay away from them for that very reason, I only invest in 2-4 families that need work, I will fix them up get them rented and cash out refi (BRRR). Works like a charm!
Quote from @Sara Frank:
Quote from @Andrew L.:
Quote from @Nicholas L.:
can you say more about your situation? do you own or rent now? how much is your pile? are you pre-approved for any financing?
it's possible to house hack in the DC metro area, it's just more difficult and more expensive than in many other markets as @Russell Brazil alluded to
for example, you could try to find a multi in DC (there aren't very many) or maybe a single family home in a place like herndon or springfield with a basement that you could live in, and rent out the house.
going to be really tough and really expensive... but if it were cheap and easy, wouldn't everyone do it? =)
if you buy random condos off the MLS then yes, they won't cash flow.
or, you could get really creative, and BRRRR or live in flip something further out - like frederick md, or fredericksburg va
how much elbow grease are you willing to put in?
good luck
Very busy with the current job so as little elbow grease as possible.
I need to move out of the current place so whatever I purchase will be for myself too.
$500k - $600k in savings (not touching retirement funds).
So condos are probably out of the question. Part of me wants a single-family house but that also means I will exhaust all my savings and take out a mortgage.
I would highly recommend taking out the mortgage and buying a single family or multifamily home. Condos often do not cash flow due to the HOA fees and tighter restrictions on the use of the property. With the amount of you have in savings its feasible for you to house hack a turnkey multifamily in DC and can likely buy down the rate/pay points to lower your monthly payment (if thats what you want to do). If you put down enough money and rent the other unit youll be able to live very affordably in an asset that will appreciate exponentially more than a condo. Being young -- this will also put you in a fun location you want while giving you the long term appreciation that DC has to offer.
Along with Russell, you have convinced me to look deeper into a multifamily. There are a few available but all in area I am unfamiliar with. It's probably a bit handful for me to handle a multifamily...
So back to square one, single family house?
The gentleman who recommend Ashburn and to rent a room is on point. Use your 3-5% down primary residence financing as much as possible and rent out an extra room. 2-4 units in DC are amazing but majority have been converted to condos or the competition is too much (I own 2, bought in 2010/2012). DC also has horrible tenant laws so I’m no longer fooling with that mess. Virginia is great. Loudon county is where all the jobs are moving and where I would buy if I was young and single.
Thanks for the recommendation. My main activities are around McLean, Arlington area, so moving north requires more commute time. Just curious why Ashburn and not other area?
@Andrew L. Our area is difficult on the cash flow side because of all the reasons mentioned above. Many HOAs have low fees though. Condo fees tend to have fees that are high and likely to get higher over time and not to mention their appreciation is less than single homes. I will suggest Herndon as one of the area that might have legs over time. Although it has seen price appreciation, I think you can find older homes that you might cash flow a few years from now. The growth around Herndon is very impressive too.
Quote from @Andrew L.:
Quote from @Sara Frank:
Quote from @Andrew L.:
Quote from @Nicholas L.:
can you say more about your situation? do you own or rent now? how much is your pile? are you pre-approved for any financing?
it's possible to house hack in the DC metro area, it's just more difficult and more expensive than in many other markets as @Russell Brazil alluded to
for example, you could try to find a multi in DC (there aren't very many) or maybe a single family home in a place like herndon or springfield with a basement that you could live in, and rent out the house.
going to be really tough and really expensive... but if it were cheap and easy, wouldn't everyone do it? =)
if you buy random condos off the MLS then yes, they won't cash flow.
or, you could get really creative, and BRRRR or live in flip something further out - like frederick md, or fredericksburg va
how much elbow grease are you willing to put in?
good luck
Very busy with the current job so as little elbow grease as possible.
I need to move out of the current place so whatever I purchase will be for myself too.
$500k - $600k in savings (not touching retirement funds).
So condos are probably out of the question. Part of me wants a single-family house but that also means I will exhaust all my savings and take out a mortgage.
I would highly recommend taking out the mortgage and buying a single family or multifamily home. Condos often do not cash flow due to the HOA fees and tighter restrictions on the use of the property. With the amount of you have in savings its feasible for you to house hack a turnkey multifamily in DC and can likely buy down the rate/pay points to lower your monthly payment (if thats what you want to do). If you put down enough money and rent the other unit youll be able to live very affordably in an asset that will appreciate exponentially more than a condo. Being young -- this will also put you in a fun location you want while giving you the long term appreciation that DC has to offer.
Along with Russell, you have convinced me to look deeper into a multifamily. There are a few available but all in area I am unfamiliar with. It's probably a bit handful for me to handle a multifamily...
So back to square one, single family house?
I agree with everyone here that said the condo fees can be prohibitive. Another option would be to buy a single family home that has a walkout basement with a full bathroom. You could add a small kitchenette (hot plate, sink, toaster oven, fridge) and rent the basement out or alternatively you could live in the basement and rent the upstairs. I use this approach in Baltimore but know people who do the same all over the DMV.
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Quote from @Andrew L.:
Location: Washington, DC (Nearby Tyson's Corner due to work location)
Status: Single. No debt. Sitting on a pile of savings.
Goals: 1) Move out of the, 2) generate steady rental income even if I move out of the place a few years later.
With the savings that I have, strategy-wise, I can think of purchasing a 2bd, 2ba condos or a townhouse (Albeit further from my preferred location) and rent out one of the rooms. Alternatively, I could buy two small condos (1bd, 1ba) and rent out one units.
The thing that gets me is the condo HOA fee. After HOA and taxes, there is very little in return, certainly not enough to cover my personal expenses let along replacing job income (Ultimate goal). I wonder how the experts on this board get around this problem? Or a better approach that I am not aware of?
Use the funds as a DP for a MF.
I wouldn't buy in DC. I'd find some good out of state markets and buy rentals there. This is what I did.
Didn't worry about buying a primary until I was engaged. Granted, I love owning my own home but I care more about rentals and sweet cash flow.
I've been doing this for a few years now. If you have questions I'm happy to help.
I am a big fan of purchasing a townhouse or SFH (something fee simple) and househacking. I think that is the best way to get started. I am a little biased, as that is my specialty. Multifamily offers you the same opportunity, but I primarily operate in Northern VA where a good multifamily investment is basically non-existent.
As many others have said, I would really encourage you to take out a mortgage. It will allow you to scale in a way that won't be possible purchasing all of your property in cash.
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HOAs in the area are not conducive to a profitable investment strategy IMO - there's too much out of your control. I agree with others that DC multifam is the best bet toward steady CF sooner with solid appreciation. You may also look at SF's in the Fort Hunt area (think south Alexandria near Mt Vernon) - I see some very reasonable properties there that are getting decent rents - leveraging those at 70% LTV could be a means to achieving your goal. Please take these as mere ideas though - not actionable advice.
Also, you mention that your work has you constrained time-wise - this will be a factor to consider in regard to the type of housing. Affordable MF housing in DC may require more of that elbow grease your mention earlier.
PS - kudos to your ability to save so well, your high cash position can put you in a powerful ability to negotiate good deals right now
Pretend you have 10k or less and learn to make it in this business wholesaling to start and maybe end. Once you can make it under those conditions, you will know exactly what to do with your cash when the time comes.