First Time HomeBuyer: DC or MD?

Question

Good Morning BP Nation!

I'm in the market for my first home purchase.  I'm an active duty service member that currently lives in works in MD and I will be utilizing the VA loan. I've looked around in MD and feel comfortable about my preferred locations but I recently began considering DC. I like going out to DC and I have always considered that commute when looking in MD. My question is, assuming I'm ok with the extended commute ( 30-45 minutes, depending on traffic), where would I see the a good ROI on investment in DC. I know of a few up and coming areas and I know which one I'm leaning towards more, but I always like to get a few expert opinions.  Just as some background information, I have 2.5 years left in the Navy and place to get out. Once I do, I will be staying in the DMV and be working mostly out of my home and going to school. I'm interested in being able to live in this place for about 5 years and either sell or keep as a rental. I'm a  young, single woman, originally from Montgomery County but as I said before I like DC and would love to learn it more, so proximity to things to do is pretty important but I am willing to live a little farther out for the right reasons. All of these places are updated and move in ready (unlike a lot of the places in MD)  So here's the areas I'm considering:

1. Condo on Pennsylvania Ave SE (3bd/1ba, w/ parking)

2. Condo on Queen St NE (2bd/2ba, w/ parking- super small... I would have to give serious consideration as to whether my existing furniture would fit)

3. Condo on Holbrook St (2bd/1ba, NO parking...I haven't seen in person but the living area looks more manageable than on Queen St; having no parking is ALMOST a deal breaker)

4. Brand new town home on Eastern Ave NE (Eden's Place, 3bd/ 2ba, w/ parking)

Any and all constructive advice is welcome!!! Thanks!

Chris Wallace · Answer

@naomi

That was one the issues with fourplexes I forgot to mention. VA and FHA loans can be very restrictive with regards to property use, condition and owner occupied status in condo buildings.

Naomi Marie · Answer

@Joe Like the FHA loan, the VA loan has several rules regarding the condition of the home. Those rules are particularly unfriendly to condos and extend to the community. For instance, a condo association can't have a delinqency rate for condo fees higher than 15% (which was prevalent in the areas I was looking in MD) and at least 50% of the condos must be owner occupied, in addition to other things. It just so happened, that after we thought we cleared all those rules with this particular condo in DC, we learned the VA won't back loans for fourplexes; and since this was a renovated fourplex, it was a no go.

My experience with the VA has pretty much taught me to avoid condos and condo associations altogether. I also plan to hold a seminar, specifically for VA borrowers so they can know what to expect, since these rules can certainly have an impact on what they can and annot purchase.

Joe G. · Answer

@Naomi Marie

Why couldn't you use the VA loan?

Naomi Marie · Answer

Just to follow up with everyone, unfortunately the VA loan would not finance the condo I was interested in Trinidad...so I've moved on to the townhouse in NE! Assuming everything works out, I'm hoping to sign the offer tomorrow. Regardless, I'm pretty sold on living in DC at this point... all of the properties I've seen are in better condition that the properties in MD at the same price point. I also really like the idea of living in the city AND being able to benefit from all the changes going on. Thanks again for the input!

Thomas Johnson · Answer

I'm a agent on Capitol Hill DC and yes the H ST corridor is a great area still in the middle of being revitalized where you can find mainly condos and row homes. If you want to be close to shops and dinning there are opportunities especially in the Trinidad  and surrounding areas to buy low and sell high at a later date. Depending on what part of MD you work you'll be closer to the major highways and going against traffic which would work in your favor. If you need an agent please feel free to contact me good luck!

Chris Wallace · Answer

Glad to be of service! Be sure to let us know what your final decision is.

Naomi Marie · Answer

Thanks everyone for the advice! I think I'm pretty close to my decision.... just a few last minute numbers I need to work out... you guys really helped a lot!

David Rivera · Answer

I'm also in the DC market, looking to gain general knowledge as well as specific market knowledge of the H Street neighborhood, where I also reside.  Looking forward to meeting and exchanging ideas with you all.

Trinidad has seen some really great growth this year, so the Queen or Holbrook are tempting.  But I would go with the rowhouse myself.

Chris Wallace · Answer

Hi Naomi

Good luck with your search. I'm glad to see a veteran using the benefits available to make an investment in your self and the community. I'm sure you've heard this in your search. But it all depends on what you looking for and of course your price point.

But a few things:

The properties near the H St/Atlas District (Queen St/Holbrook put you very close but not in the middle of this popularizing nightlife area. They are close to the new street car and areas with access transit generally see appreciation due to nearby development activity.  That said a lot of the "new" condos in that area are just converted fourplexes. So look very carefully and make sure you understand what you will and won't get in the small building.

In the areas east of the river (Edens Place/Penn SE,  I believe there is definitely some upside potential but these neighborhoods are somewhat lacking in amenities.  That may be due to their close proximity to MD. But you will have to drive to shop,  go out, etc. But you'd still be inside the city and could get to downtown or even across town with a 20 min drive. The feel of these neighborhoods is more suburban.

I'm a bit transit/urban biased.

Joe G. · Answer

@Naomi Marie

Welcome to BP.  I am active duty Army, with plans to stay until retirement, however my plans may be able to give you some ideas.

-Purchase where you think you can rent it out the best if that is your plan, however if you want a better quality of life buy where you want to live and deal with the rental part later.

-Buy within your price range for payment as you don't want to be house-poor while living there.  Military BAH is great because it is tax-free.

-Research rental rents in the areas you want to purchase, ensure the rental amount covers your costs( mortgage, repairs, HOA, PM fees).

Questions for you:

Are you using a VA loan?

How much down payment will you use?

What is your savings plan now for when you turn the home into a rental or cover unexpected costs?

I have heard the DC market is rocketing and the MD market is following but not quite as strong.  Depending on what you truly want, a home or a future investment you will have to decide where to buy.

Good luck and welcome again!