First rental property: DC, MD or VA?

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First rental property: DC, MD or VA?

Leticia Otero
New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes

Newbie and ready to invest in my first rental property! It's scary! Every "friend" and family member has something to say about location and that now is not the right time...I've been told that the best of the 3 is VA because the laws are better for property owners (easier and faster eviction)...is this true? What are the pros and cons of these states? I am looking for a turnkey property. I will really appreciate all the advices and opinions I can get! Thank you BP community!

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Russell BrazilBusiness Member
Moderator
Real Estate Agent 路 Washington, D.C. 路 Member since 2012 路 17k+ posts 路 30k+ votes
5y

DC will have the highest appreciation. MD will have some more moderate price points. All 3 are extremely hot, but Virginia is the hottest of the 3 with properties getting 30 plus offers there with more like 10 to 15 offers in MD and DC.  Rents are also weaker on the Virginia side of the border. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent 路 Washington, D.C. 路 Member since 2012 路 17k+ posts 路 30k+ votes
    5y

    DC will have the highest appreciation. MD will have some more moderate price points. All 3 are extremely hot, but Virginia is the hottest of the 3 with properties getting 30 plus offers there with more like 10 to 15 offers in MD and DC.  Rents are also weaker on the Virginia side of the border. 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    4Reply
  • Joaquin Camarasa
    Real Estate Agent 路 Springfield VA 路 Member since 2018 路 480 posts 路 400 votes
    5y

    I agree with what Russell has shared. It is truly hard to get something under contract in any of the three inventory is super low. In regards of the laws being better for property owners, I would recommend checking in with a lawyer. I do know that in Virginia you can hold the deposit in a rental for a total of 45 days to cover any damage which seems to be longer than in MD and DC. Also, even if something is broken in the property and it takes a little time to fix it you can still charge the same amount of rent. Now, with the new covid laws and the eviction moratorium is really tough to evict anyone in all three. Looking at the long term, it looks like Virginia has better laws for landlords, yes. 

    1Reply
  • Aj Parikh
    Rental Property Investor 路 Centreville, VA 路 Member since 2019 路 1k+ posts 路 799 votes
    5y

    I am from Northern Virginia and I agree with @Joaquin Camarasa and @Russell Brazil that the market is super hot. I am currently looking for a house to flip and I am new to finding fixer upper properties and the competition is immense so unless you are willing to come up with 15k above asking rate, its really tough to beat the competition. I could be wrong but that is what I am seeing. 

    Currently, I am also going through with an eviction with a tenant in Alexandria and I got a court date within 3 weeks of filing so yes, laws are in favor of landlords in VA but I can also confirm that once I am able to evict the tenant because COVID has changed everything. The judge might come back and tell me that I can afford to have a tenant not pay for certain months and I have to sit and eat up that cost.

    If I have scared you till now with investing, I apologize, I didn't mean to. I am just sharing my experience with rental properties in the area. 

    If you have given a thought to explore out of state or turnkeys, I recently purchased a single family home in Cleveland with Martel Turnkey for $90,000 and cash flowing close to $300-350 / month. Let me know if you want to connect and chat about that option. Good luck on your investing journey!! Welcome to the hustle!! 

    3Reply
  • Chris Mills
    Investor 路 Northern VA 路 Member since 2020 路 124 posts 路 87 votes
    5y

    I agree. If you're looking for cashflow you're way better off going out of state. It's just too hard to make the numbers work here. If for some reason you have to be here, or can't go out of state, it's possible here, but CoC returns will be lousy compared to employing your capital in other US markets.

    3Reply
  • Osim Mannonov
    Property Manager 路 Fairfax County, VA 路 Member since 2020 路 7 posts 路 1 vote
    5y

    @Chris Mills What are some other US markets that you are keeping an eye on or are worth researching about? Thanks!

    0Reply
  • David Fernandez
    Real Estate Agent 路 Vienna, VA 路 Member since 2016 路 289 posts 路 253 votes
    5y

    Welcome to BP @Leticia Otero!

    In general, yes, landlord-tenant laws are better for landlords in VA than in MD or DC. However, you most likely won't have to worry about evictions and other issues that come up between landlords and tenants as long as you maintain your properties and screen your tenants before agreeing to a lease. I'd say that proper screening reduces your chances of having an issue with your tenants by 99%.

    Having said that, I own properties in both MD and VA and I prefer VA. The landlord-tenant laws are a plus, but you will find that there are unnecessary expenses, permits, licenses, laws, taxes, etc. in both MD and DC compared to VA that make investing a little more complicated (and expensive) in MD and DC than it should be.

    1Reply
  • Chris Mills
    Investor 路 Northern VA 路 Member since 2020 路 124 posts 路 87 votes
    5y

    @Osim Mannonov Indianapolis, Jacksonville, Kansas City, St. Louis, and Cleveland.

    1Reply
  • Aj Parikh
    Rental Property Investor 路 Centreville, VA 路 Member since 2019 路 1k+ posts 路 799 votes
    5y

    @Osim Mannonov Cleveland and Memphis are on my top list. There are a lot of turnkey providers in both those cities and you can find an investment under $100k that would cash flow $300-350 / month. Let me know if you want to connect and talk about this. 

    2Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y

    Wow! Thanks for the advices and opinions! Very helpful 馃槂馃檹馃徎. Chris, how bad of a % in return do you think I could aprox have? Since this will be my very first investment i would like it to be in a state where at least I鈥檝e lived on 馃槄(so i have an idea of the demographics)...I鈥檒l look into other options though. Thanks to all! 

    0Reply
  • Thomas WheelerPro Member
    Investor 路 Eudora, KS 路 Member since 2018 路 9 posts 路 3 votes
    5y

    @Chris Mills

    Kansas City on the KS side? Or MO side?

    0Reply
  • Osim Mannonov
    Property Manager 路 Fairfax County, VA 路 Member since 2020 路 7 posts 路 1 vote
    5y

    @Chris Mills @Aj Parikh Thank you very much for this advice. I am still working my way to saving up enough money to get started in this and those seem like great options for when the time comes. Does the DMV area have much higher property appreciation compared to properties in cities like Cleveland and Indianapolis? Also, what are some risks to think about when investing out of state?

    0Reply
  • Aj Parikh
    Rental Property Investor 路 Centreville, VA 路 Member since 2019 路 1k+ posts 路 799 votes
    5y

    @Osim Mannonov I feel the risk is the same for out of state vs in state because it all comes down to how involved you are with your property. You will have to come up with systems and processes to be able to manage a rental property. Its important to network and find the turnkey provider that will be transparent with you. Getting educated about out of state investing would be 1st step though. Check out Long Distance Real Estate Investing by David Greene.

    1Reply
  • Catie Sullivan
    Investor 路 Kansas City, MO 路 Member since 2020 路 5 posts 路 3 votes
    5y

    @Thomas Wheeler - I think both KCK and KCMO. There's a lot of opportunity on both sides of the city right now. 

    @Chris Mills - which side of the city have you been keeping your eye on?

    0Reply
  • Chris Mills
    Investor 路 Northern VA 路 Member since 2020 路 124 posts 路 87 votes
    5y

    @Leticia Otero I would never buy anything that doesn't cashflow. The trouble is, with home prices and taxes in our area, you're putting down WAY too much money to get your monthly note far enough below applicable rental rates to feel comfortable. That delta is ultimately what drives down your return. That said, if you don't mind that and you just need a solid place to put your money, and you're making great returns elsewhere, DC area real estate is a solid bet. I know people who put down $300-400k+ on DC real estate just because they need a solid place to park their money close to home. Nothing wrong with that, it's your money. An investment like that close to home may be a good first step in getting used to investing and then you'd feel more comfortable chasing returns elsewhere.

    @Osim Mannonov Part of what I love about Indy is that it's boring. You're not going to get the appreciation you would in the DC area, but you don't have to worry about losing 30% of your value in a downturn either. Low volatility has a prized place in most people's investment portfolios. DC is relatively stable in downturns as well, to date, but the prices are significantly higher here which is a barrier to entry to some.

    For your second question, I'd say getting/having solid relationships in the area before you pull the trigger on something is the best hedge against risk in investing out of state. 

    @Catie Sullivan I agree with you. I think there's opportunity on both sides.

    2Reply
  • Tim Robinson
    Realtor 路 Silver Spring, MD 路 Member since 2017 路 55 posts 路 36 votes
    5y

    Glad to hear you鈥檙e getting started investing @Leticia Otero! I agree with a lot of what many people have posted in response. I own properties in both DC and MD, but I have owned them for quite awhile and they have appreciated to a point where they now cashflow nicely. If you鈥檙e trying to get started in this insane market, it is going to be difficult if not impossible to get something that cashflows there, and MAY be better off looking out of state, even if it sounds a little scary;)

    That being said, I want to echo some of what @David Fernandez said in his reply. I don't know VA That well, but in MD pay special attention to the taxes. They can be ridiculous, especially in special townships and cities like Takoma Park and Baltimore city, as well as rent control. In DC, I have been very fortunate with my tenants over the years, but the landlord laws you mentioned being favorable in VA are the opposite in DC even with the revisions of TOPA. There's also a lot of regulatory red tape, licensure and inspection mandates, and some weird lease restrictions.

    I don鈥檛 say all of this to scare you away from the DMV, but just to set your expectations, I also own properties ion the Midwest and down south and they are exponentially easier to manage (even though I currently live in Europe) and cashflow much better. Either way, just do your research and you鈥檒l be good to go. Good luck!

    1Reply
  • Jeremie Torres
    Rental Property Investor 路 Baltimore, MD 路 Member since 2020 路 53 posts 路 48 votes
    5y

    The way I see it, it doesn't matter which side of the states you pick. Learn the market, learn the rules, learn the tendencies and learn the workaround on them. If Baltimore city or the whole MD state is really a bad state to invest in cos of how tenant-friendly it is, then there'll be nobody investing in here and have made themselves wealthy. 

    Point is, we'll run into an issue with tenants no matter where in the DMV or any states if we don't screen them well. Sure, some bad tenants still make it through the cracks but it's proven that you have a better chance of putting the right one in your rentals if you screen them thoroughly. 

    I say learn more about the surrounding markets and define where you really wanna be in and then focus on that. RE investing horizon is so wide, if you don't narrow it down, you're gonna have a hard time making a move. So, let the information come to you and parse them really well. Then make a decision on where you really wanna focus on to get started. 

    If you'd like to chat a bit, I don't mind at all. Get at me anytime. 

    Good luck!

    1Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y

    @Tim Robinson thanks for that detailed explanation! 
    @Jeremie Torres I agree, I only focused on the worst case scenario, but of course there is much to learn about each market.

    Definitively I will do more research before any move... thanks for all the wonderful advices!    

    1Reply
  • Leo Watts
    Real Estate Agent 路 Washington, DC 路 Member since 2017 路 109 posts 路 93 votes
    5y

    Where do you live now? What areas do you like? I generally think investing in an area you know or like is the best strategy, as long as numbers look decent.

    1Reply
  • James G.
    MD 路 Member since 2018 路 71 posts 路 23 votes
    5y

    @Leticia Otero

    I'm in Maryland and bought my first duplex in Ohio in 2020. I went out of state for the cashflow.

    2Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y

    @Leo Watts I live in Clinton, MD...but looking to invest in VA where I used to live

    0Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y

    @James G. How did that go? Did you went there to check the property out? Where you familiar with the area or had any friend or relatives to help you make the decision? Did you use a company? I am definitively interested in learning how that process is

    0Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y

    UPDATE: I wanted to thank you all! Today we closed our first rental, it was a turnkey condo located in northern VA. Got a great 30 year fixed loan...interest that was locked right on time. I was so doubtful to find anything in this hot market that had at least some cash flow, but it was possible!!! Thanks again!!!

    2Reply
  • Aj Parikh
    Rental Property Investor 路 Centreville, VA 路 Member since 2019 路 1k+ posts 路 799 votes
    5y

    @Leticia Otero Congratulations on the purchase!! What area did you purchase in? I am curious to know about turnkey providers in our area.

    0Reply
  • Leticia Otero
    OP
    New to Real Estate 路 MD 路 Member since 2021 路 15 posts 路 8 votes
    5y


    @Aj Parikh it was not from a provider, it is turnkey condition though, no repairs needed! Purchased in Alexandria, VA 22312.Timing was perfect, got great low interest rate, motivated seller and apparently not many people looking for condos at the time 馃槉. Return will be between 8 & 12%. I was afraid but all the great advices helped me a lot 馃槂

    0Reply
  • David Fernandez
    Real Estate Agent 路 Vienna, VA 路 Member since 2016 路 289 posts 路 253 votes
    5y

    Congratulations @Leticia Otero! The first property is always the hardest one. 

    0Reply
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