What next in the DC market?

Question

Hello Biggerpockets community. I'm from the D.C metro area and began investing three years ago. I currently have three rentals. However, listening to biggerpockets podcasts and stories, I can't help but wonder am I doing something wrong and could I be doing more. My three rentals are townhomes. I'd like to jump into multifamily homes, and working to educate myself in that arena. However, it seems in the D.C market finding good affordable multifamily homes is extremely challenging. Additionally, I've also been wondering, rather than using equity to purchase a multifamily, should I be using the equity in a method I've heard to pay down and fast track the payment on principal? I'd definitely appreciate some feedback, especially from people with multifamilies, possibly in the D.C area on how they are making it work in the market here. Looking forward to a great discussion and feedback.

Russell Brazil · Answer

Our entire region has an extremely low number of multifamilies compared to other metro areas. So the effects of supply and demand come in. Low supply coupled with high demand equals higher prices, even more so than other asset classes in the area.

Couple that with the fact that the highest and best use of the multifmailies that we do have in DC proper is as condos,....as they are converted into condos that further exasperates the possible supply of multis.

So it is absolutely possibly to buy a multi here, but you would need to be realistic on your price.  A pretty run of the mill, not updated 4 unit in Trinidad is likely going to be over $600k.  You can cross the river and get one for $500k.

The other thing to keep in mind is that in DC if you own 5 or more units you will be subject to rent control. Also if you purchase a property that has a rent controlled tenant in it...they are grandfathered in even if it is not applicable to you.

I would stay away from Takoma Parks multis as TP has rent control beginning at either 1 or 2 units, and it is much much more restrictive than DCs.

Russell Brazil · Answer

@Ian N. I prefer stuff WOTR (West of the River) to EOTR (East of the River). There are other areas on the other side as well such as Deanwood etc.  If I were to go EOTR, I would probably stay in either Anacostia close to the bridges, or Deanwood over by the few metro stations over that way.

But I personally like owning nicer assets, so I would stay on the WOTR personally. I know plenty of people, and have plenty of clients that have ventured EOTR. Anacostia by the way was up something like 20% last year.  Trinidad, Brentwood, Ivy City, Hill East, area all areas I like that have multis.  Petworth has the occasional one.

Ian N. · Answer

@Russel

@Russell Brazil thank you for the great feedback. I think you nailed this market exactly as I see it, with some additional insightful information. What's your thoughts on the on the two areas you mentioned. Trinidad and across the bridge I assume you're referring to the Anacostia area. I know there's a lot of buy/sell activity there, but then there are other concerns as well.