Advice on Northern VA Condo

2 Replies

Hello All. I'd appreciate anyone's thoughts on what to do next with a condo in Falls Church VA. We lived in the unit for a little over 2 years and moved out last September. Starting in October 2017 we started renting it at $1670 with PITI + HOA coming to $1652. We unfortunately had to replace the refrigerator and dryer this year which made us cash flow negative. We could probably find tenants at 1700, more if we updated the floors in kitchen & bath.

HOA seems well run with sound financials. Roof was replaced recently without special assessment.

We're trying to decide whether to sell late in the fall, rehab over the winter to sell in the spring, or continue renting after tenants move out. Our interest rate is 3.625 but with $39 PMI at ~81.5 LTV. Assuming we keep the property until October 2020 we'd see a 9% return on putting down 10k or so to reach 78% LTV and remove PMI. October 2020 is also when the clock runs out on our 2/5 cap gains exemption. Recent nearby sales indicate we could sell at 6-7% appreciation since 2015.

Maybe we just had some bad luck the first year but it was a pretty hands on experience.  Any thoughts on what you would do with this property?  

With expenses + capex + property management, a mortgage equal to rent will simply never cashflow in the short term.  I've looked at numbers like this and in reality you will probably lose around $1000+ per month.  Just using the "50%" rule, you can expect to continue to pay around $1250 per month on average over the life of the property in those types of expenses.  The refrigerator is FAR from an outlier.  When will the roof be replaced? When will the $3500 HVAC unit be replaced?

The main reasons to hold would be:

1.  Expectation of rent growth with people still flooding to the NoVA area (1 million+ new people expected to move to fairfax over the next few years)

2.  Speculation on appreciation

I'm currently looking at properties like this because I need a primary residence, but they certainly aren't investments.  Kind of a balance of just primary residence with hope of growth in the future.  Definitely negative cashflow for the near term, though.

As you can see properties like this are mostly just speculation plays with moderate negative cash flow.  The other thing that will kill your returns is that falls church has a 1.25% property tax, one of the highest in the area.  Other counties here in NoVA are in the 0.9-1% range.

It's possible with rent growth you may be breakeven or positive in 10 years, but I doubt sooner than that.

If your cash flowing $18 if the HOA fee goes up your cash negative. Being a condo less can go wrong but when a tenant moves out you will need to paint / replace carpets etc which a typical turnover is $1000-$1500.

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