DMV Single Family Home Rental Investment Strategies

16 Replies

Hello, I am an investor in the DC, Maryland, Virginia area. I love in Montgomery County. Currently I own one SFH rental in Lanham (PG County). I bought the house for about 180K and collect $1800 per month (about $500 positive cash flow).

I'm considering another property. However, I am wondering what people recommend. I'd prefer not to spend more than 180K on the house. The current strategies on my mind are:

1. Get another  ~160K single family home in PG County. PG County values are going up IMO. However, it is not the best of areas in terms of crime so that's an issue.

2. Find a property in Montgomery County. I feel like MC property values are a sure to go up as it's a desirable place to live. Finding a place in Montgomery County for 180K is hard. Likely I'll have to get one for 200K and the rent is no better than PG County.

3. Buy a condo for 90K somewhere in PG County or Baltimore County.

4. Buy a really cheap house in a decent area in Baltimore City.

Wondering what people think? The positive cash flow on a cheap condo is much higher than a SFH but maybe that's a bad idea?

I prefet Montgomery County, but my target price point on my sfh rentals are in the 400s in MoCo. If I were to considet PG, Id probably target 300s in College Park area. 

Originally posted by @Taylor Lovett :

@Russell, I take it you are going for appreciation over cash flow?

I go for both, and have patience. I have a Rockville SFH that has free cash flow of $1600 per month. Of course when I boughit 10 years ago it had free cash flow of $200 per month. Got a Silver Spring sfh at $900 a month, 4 years ago it started out at $400 a month. Where prices appreciate, so do rents typically.

 

Originally posted by @Matthew Reichert :

How can you trust that PG county property values will continue to rise if crime is also rising?


Crime is decreasing there. There is no spike in crime on any report that I have seen. Even if it did, it would not encompass an entire jurisdiction. With Prince George's County much of the crime is along the DC boarder. There are areas with little to no crime, with it being less then many of the other areas some people prefer. Prices continue to rise just like every other area. 

 

Originally posted by @Mark Cruse :
Originally posted by @Matthew Reichert:

How can you trust that PG county property values will continue to rise if crime is also rising?

Crime is decreasing there. There is no spike in crime on any report that I have seen. Even if it did, it would not encompass an entire jurisdiction. With Prince George's County much of the crime is along the DC boarder. There are areas with little to no crime, with it being less then many of the other areas some people prefer. Prices continue to rise just like every other area. 

 

That's good to know but that's not what OP said, so he should be told that  

Originally posted by @Mark Cruse :

@Matthew Reichert well honestly it's general knowledge for whoever. There has always been biases and inaccurate assessments made about the county. You made to comment about trusting rising prices so I responded to you. 

 Sorry, my response sounded snarky, I didn't intend that 

@Russell Brazil I read frequently in the forums that you are an advocate of a Rockville sfh in the $400s. Do you target particular neighborhoods? Proximity to metro? Proximity to downtown? What layouts and amenities do you find maximize rent? It looks like Rockville sfh rentals run in the $2100-$2500/mo depending on location and condition. I am interested to learn more as I am likely going to be moving about $140k in a 1031 exchange to the DMV area. This seems like a potentially "safe" investment rather than the more risky moves with buying EOTR or in PG County. Those areas may have a better chance of appreciation but as you have pointed out before, those areas have a higher potential for returns because of the risk involved. Interested to see what you think. 

Originally posted by @Terrence Bayly :

@Russell Brazil I read frequently in the forums that you are an advocate of a Rockville sfh in the $400s. Do you target particular neighborhoods? Proximity to metro? Proximity to downtown? What layouts and amenities do you find maximize rent? It looks like Rockville sfh rentals run in the $2100-$2500/mo depending on location and condition. I am interested to learn more as I am likely going to be moving about $140k in a 1031 exchange to the DMV area. This seems like a potentially "safe" investment rather than the more risky moves with buying EOTR or in PG County. Those areas may have a better chance of appreciation but as you have pointed out before, those areas have a higher potential for returns because of the risk involved. Interested to see what you think. 

 Yeah so I like certain neighborhoods in Rockville. East Rockville, Burgundy Estates, Manor Lake, Manor Woods. Proximity to Rockville metro, but not Twinbrook metro. I do not like the commonly found Cape model home in Rockville. (Not to be confused with a Cape Cod). Those tend to be poorly comsteucted. 

I also want rents higher than what youve mentiones. I get 2900 on one of mine there.  2500 would be the floor of what Id want not the ceiling. 

Originally posted by @Taylor Lovett :

What would you recommend in the area at 200K at most? Thoughts on Germantown (Montgomery County)?

I put an offer on a condo in Germantown recently all cash full asking price with an escalation clause and still got out bid. Oh well.

 

Originally posted by @Russell Brazil :

I go for both, and have patience. I have a Rockville SFH that has free cash flow of $1600 per month. Of course when I boughit 10 years ago it had free cash flow of $200 per month. Got a Silver Spring sfh at $900 a month, 4 years ago it started out at $400 a month. Where prices appreciate, so do rents typically.

Russell, I haven't heard many people point out this phenomenon. I realize the mortgage can be a fixed expense. What about the other expenses though - do they rise at a slower rate than the rents, in your experience? Is that what enables the cashflow to increase so dramatically?

Originally posted by @Kevin Grove :
Originally posted by @Russell Brazil:

I go for both, and have patience. I have a Rockville SFH that has free cash flow of $1600 per month. Of course when I boughit 10 years ago it had free cash flow of $200 per month. Got a Silver Spring sfh at $900 a month, 4 years ago it started out at $400 a month. Where prices appreciate, so do rents typically.

Russell, I haven't heard many people point out this phenomenon. I realize the mortgage can be a fixed expense. What about the other expenses though - do they rise at a slower rate than the rents, in your experience? Is that what enables the cashflow to increase so dramatically?

 Im not super diligent about tracking my expenses. My vacancy rate averages 2% amd could easily be lower if I put some thought into it. Repairs are pretty steady year to year. Usually have 1 minor thing per year thats a few hundred bucks, and 1 major thing thats $1000-1500. Then I often sell a property off as large cap expenses start looming. Although as time goes on Im more likely to keep some of the better performing properties regardless of the capex like my Rockville property. Ive had though older 1800s homes in the past, and those had a lot more repairs than most of my curreny 1960s-1980s homes I have today.

@Taylor Lovett Germantown can be very competitive from my experience representing both buyers and sellers there. Homes often go for more than list price.

There tends to be less buyers going into late fall and early winter, then pick up again in February. Prices also drop during those times. Buying in that time frame should get you a better deal and time to make any repairs before the market picks back up in early spring.