How to afford a more vet to DC, and leave 2 years later w/rental?

6 Replies

Hello, 

My first post is a big one for me. I’m moving to D.C. from Dayton, Ohio in four weeks to take a temp promotion (2 years). Although it’s a $17k/year raise, the cost of living is crazy higher.

With a 2-year residence in mind, I am eyeing an FHA loan. I only have $112k left of VA entitlement left, which might get me a cardboard box in DC. But I'm also getting married in August, so I can't afford some colossal real estate purchase — even at only 3.5% DP.

What/where should my game plan be to live somewhat comfortably, and leave in a couple years with a cash-flow property?

I currently have two past residences (SFH) that I rent out totaling

Jon 



Thx, Jon. 

Originally posted by @Jon LaDue :

Hello, 

My first post is a big one for me. I’m moving to D.C. from Dayton, Ohio in four weeks to take a temp promotion (2 years). Although it’s a $17k/year raise, the cost of living is crazy higher.

With a 2-year residence in mind, I am eyeing an FHA loan. I only have $112k left of VA entitlement left, which might get me a cardboard box in DC. But I'm also getting married in August, so I can't afford some colossal real estate purchase — even at only 3.5% DP.

What/where should my game plan be to live somewhat comfortably, and leave in a couple years with a cash-flow property?

I currently have two past residences (SFH) that I rent out totaling

Jon 



Thx, Jon. 

 Personally, I don't consider two years to be long enough to warrant buying a house. The cost of sale can be 8% to 10% when it comes time to sell and unless you want to have rentals scattered about the country, you are looking at a costly logistical problem with underwater properties. Call a local real estate agent in the area you want to buy in, and ask what the cost of selling an average property will run you and put together a spreadsheet from purchase, to managing, to upkeep to selling. That won't cover the "hassle factor" which you should also consider, but from a numbers point of view, it is very enlightening. It may be far more costly than you presently imagine, especially in D.C. I looked into investing in Maryland and found the property taxes and transfer taxes too onerous to even consider taking the plunge.

The more cash flow, the higher risk the property is in this market. You will get higher cash flow in PG county, but with properties more subject to variance in economic conditions and low to no rent growth. In DC, Montgomery County, Arlington and Fairfax County you will get less cash flow on initial purchase, but a lower risk asset with higher rent growth and higher appreciation.

@Jon LaDue , welcome to DC, I grew up in Cincinnati and moving from Dayton to DC is certainly a substantial change.  For that short of a time period, I would look into purchasing a small multi in DC or a row home with an english basement.  You could also buy a single family or townhome in MD or NOVA that would make sense as a rental if you move in 2 years.  DC beltway is a much more stable market then most areas in the US, so long term ownership and investment can be less risky.

Where specifically your job is located in the DC metro area is important relative to the length of your commute and how much you’ll hate your life and what neighborhoods to look at.  So let us know if you want to share that.

For me 17k x 2 years aka 34k bonus is not worth the cost and hassle of relocating to DC then back to Ohio and various transaction costs. I would just stay in OH and grow your REI there.

Thank you for the great feedback thus far @Mike M. , @Russell Brazil , @Dan Bernstein and Account Closed

To provide more context, I'm a federal employee and the promotion would be from GS12 to GS13, so after 1 to 2 years, I would be eligible for GS14, or at least make it easier to compete for GS13s outside of D.C. In the long term, the move makes sense for me.

I would be working in the Crystal City area, but it seems the most affordable properties I've found are either NE D.C. or down around Indian Head* or Heights*.

I would be interested in areas that would attract long-term tenants, but then there is a tradeoff with costs. I have also contemplated the FHA 203k loan and living/rehabbing during my time there.

Your tolerance for commuting stress is a big factor.  Your life would be hell commuting from NE DC to Crystal City, in my opinion, but others may be ok with it.  Personally I have rentals in more affordable parts of Arlington (Columbia Pike Corridor) which in the long term is in the path of progress.  They are super easy, tenants are great, rents going up every time I get a new tenant.  But that's just me .. many different styles out there.

Oh and if you buy in the area of Crystal City and Amazon HQ2 lands around there, that would be awesome lol.

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