I am currently looking for investors that either currently own or have owned in the past investment properties within washington, d.c. (ne,se, sw,nw). My question is what didn't you know before investing in DC that as a landlord you absolutely must know. I know from the podcast and forum DC is a very tenant friendly state, evictions are difficult and even after the lease expires the tenant still continues to be on a month to month until they decide to leave or they get evicted. Horror stories and quick tips are all welcome.
A couple of key points to remember when landlording in DC....DC has rent control if you own 4 or more units (It might be 5 or more?). There is also the whole TOPA (Tenant Oppurtunity to Purchas ACT) rights issue in DC. Under TOPA a tenant has to be given the oppurtunity to purchase a property before it is listed for sale. This can create a headache, what if the tenant tries to use his TOPA rights but can not qualify to buy...this an prolong your sales process signifigantly. What if your tenant decides to sell their TOPA rights to a third party as has happened.
DC is a great market for investors, you just need to be aware of some of these specifics to the market.
@Russell Brazil Thank you for the heads up, DC is great I am trying hard to get a 4 unit but they are going quickly
I am a CA landlord. So while I have no experience with DC laws, I will say embrace the pro-landlord laws. CA is a VERY tenant friendly state and honestly it has made my life a lot easier in many ways. It is very black or white. I have had a few problem children shape up because the laws were that clearly in my favor.
I personally am a huge believer in brushing up on the laws. I love NOLO and buy it for every state!
Hey Jon, I've been land-lording a SFH in SE DC for about 2 years. Things to know, DC is definitely a Tenant friendly city. What I've learned is that it best to work with your tenant as much as possible because evictions are very tough. Although, I've had to file for non-payment of rent a few times, it worked out better to put my tenant on a payment plan to catch up for unpaid months. My advice is to make sure you do a thorough tenant screening because they may be there for a while.
I too am looking for a 4 unit Multi in DC to invest in. Specifically in Trinidad, near the H St. corridor. They are definitely going quickly. I'm hoping to find one before it hits the market. Good luck with your search.
I generally agree with everyone here. As I have had some tenant problems, I would like to reiterate what @Elizabeth Colegrove said. Once you go through the process of legally crossing the "t" and dotting the "i" the law is clear, and it really helped me deal with a bad tenant.
It took a while to get the registrations, inspections, lease verified etc done, but its good to have it all in place. Hope that helps
@Jon Sheffield how is your search for a property in DC going? Have you bought something yet? My husband and I own a few places in DC. My biggest advice is location, location, location. Buy in a desirable area, near the metro if possible so it would be easier 1. to market it, get many applicants and have more choices to select a good tenant. 2.) ideally get more professionals/steady income renting who will hopefully give you less headaches. Feel free to email me and we'd be happy to share our experiences with you.
I've been under contract for a 4-unit near Trinidad since mid-November. Sale was going well, until day before closing when we were informed tenant was exercising their TOPA rights. I knew about TOPA in general terms, but I was not aware just how long they have at various stages to hold up a deal and the fact that they need not demonstrate ability to buy upfront.
Because of the extent of tenant-friendly laws and how often they seem to be changing (every tenant in the city should have received a copy of the tenant bill of rights this year, if they didn't, any rent increases during their tenancy are illegal), I'm considering putting my property under management even if I owner occupy.
A different but related question: what is the cap rate you can expect from a rental property in DC? Like the 4 unit mentioned earlier? With the additional regulation, I guess investor would demand a higher cap rate than the neighboring MD or VA market?Thanks!
@Sara N. I'm not sure of the exact cap rate giving the high demand of d.c. properties I believe it would be fairly high due to the low NOI of the 4units. Typically the owner pays water and the tenants handle everything else utility wise. Beyond that you have your normal maintenance, taxes, property management fees etc. But I'm really out of touch on the cap rates for DC, hopefully someone else can give you a real solid answer.
@John Fabros Just ran into a topa issue as well on the last building I had I know your pain. I wanted to wrap the closing cost into the loan, but couldn't because the current owner bought out the tenants topa rights. Meaning instead of asking if they wanted to buy he offered them money to leave and give up their rights to purchase the building. D.C. is a anomaly and can be very difficult to deal with from the tenant aspect. Although it is worth the headache in the long run. Good luck to you my friend
@John Fabros TOPA can be a royal pain in the A**. Also be aware that the tenants can sell their TOPA rights to third party, who can then delay or derail the sale. On the selling end, I try to have my sellers do everything possible that is legal to get the tenants out before we list a property. Most of the time when a tenant does invoke their TOPA rights, they are just looking for either the buyer or seller to pay them off to waive the rights. This is a very important thing though....the payoff is typically to come from the Seller. Ive seen buyers get tricked into this. As a buyer DO NOT PAY SOMEONE TO WAIVE TOPA. The reason for this is that even waiving your TOPA rights is not binding...they can still invoke TOPA later. So dont pay some stranger a few grand for a promise they may not keep.
@Chase Gu 2-4 unit properties do not trade on cap rates, but if you were to measure them the District would have a lower cap rate in spite of the tenant friendly laws. The properties have a higher appreciation potential thus pushing the prices on them up.
@Jon Sheffield Where are the properties you have been trying to purchase?
@Jon Sheffield welcome to BP. DC is in fact a tenant friendly city. However, this should not keep you from investing here; the returns are great. I currently manage over 30 properties in DC (all 4 quadrants).
An item that has not been brought up. All rentals need to have BBL in order to be a legal rental property in DC. Fairly simply process but DCRA can be a nightmare to deal with sometimes.
Happy to share my experiences as a land lord and property manager. Additionally, happy to explains all the ins and outs of TOPA laws, rent controls and the lease process.
@Andrew Nevins I have been unsuccessfully bidding for SFH in NE and SE DC (Anacostia, Barry Farms, Deanwood etc ) which I want to rent out. In your experience, are there any neighborhoods (in NE and SE) where renting SFHs is easier? Any recommendations?
@Sara N. Do you have any recommendations on areas to look for investment properties in DC? I have been also looking for properties close to metro (1 mile radius) in NE and SE DC. The search continues.
From when I posted about a year ago I started really looking for a multi-unit in DC last October. I am about to close this Tuesday so it has taken some time. As for SFH and renting in DC the rules are the rules, although if all you have is one unit you can charge what you want for rent. I believe once you have two or more units there is a cap on how much you can rent units for.
If you aren't familiar DC is very tenant friendly the eviction process is long and taxing with very strict timing and rules. Officially if you rent even just your house out you need to have a basic business license, get the house inspected to comply with DC. You can choose not to follow the official process although if your tenant files a complaint with DCRA you will have serious problems.
As for area recommendations to look for houses is based on your budget. I will suggest you pick an area and contact owners off market houses on the mls last only days with multiple offers. This is easier said the done.
I would suggest that you work with a realtor if you aren't fimilar with DC. I can give you my realtors info if you want.
My last bit of advice is to keep at it just like with many things it comes down to money and structuring the deal, don't be discouraged about the number of bids and amount of time. I put in about 20-25 bids before I got one good one and turned down a couple not so good offers.
@sidrao Is this your first time purchasing a home in three years?
Returns are good in DC there are a lot of investors at this time your joining the gold rush not late but well after the start.
@Jon Sheffield Thank you for the very useful details! I will keep the tenant issues in mind.
Either I was getting out-bid (usually by 15-20K) or found structural issues during inspection, which owners did not want to repair or give discount for. But, my number of failed bids is only half the number you went through - so I will not be discouraged :)
No, I did buy a house 2.5 years ago - so, it will not be the first in 3 years. But, what is the benefits if it is the first house in 3 years?
Yes, would greatly appreciate any pointers on realtors with good eye for investment property.
DC has a program called DC open doors that will give you down payment assistance if you haven't owned a home in the last three years. It also allows you to buy a SFH, triplex, 4plex.
The same with me I would get outbid by a couple of K that was my experience.
Send me a message and I will send you the realtors info.
Also awhile back in the podcast there was a landlord from DC I believe it was episode 66 with Michael Blank gives some good tips.
Originally posted by @Russell Brazil :
@Sid Rao Why would the seller discount the price or repair the issue when they will have another 5 people lined up who will take the property as is?
@Jon Sheffield rent control in DC begins at 5 units.
So true russell it's definitely a sellers market. Thanks I wasn't sure of the number of units for rent control.
I'm a landlord in Washington DC. I own rental properties in both NE and NW DC. To me, the most crucial aspect of being a successful landlord in DC is doing proper tenant screenings. Don't just look at the potential tenant's credit score, employment history, and landlord references. You should also check to see whether or not they've had any criminal or civil court cases brought against them. It's a huge red flag if someone has been in court before for an eviction or related rental issue.
I've been a landlord for many years now and I've only had to go through the eviction process once. It was very painful, but thankfully the tenant voluntarily moved out and signed a promissory note for the back rent owed as soon as I filed for eviction because she didn't want it to go on her record.
@Sid Rao So many neighborhoods like H ST NE are priced out. You may want look at other neighborhoods of: Anacostia, Brentwood, Brookland, Ivy City, Fort Totten metro area, as they are still developing. We bought our last rental near R.I. Ave metro and even that neighborhood is now untouchable for investors.
What about the Columbia heights area what are you guys thoughts? Nice area priced retail but rent in the area makes the ROI decent.