Looking for advice, better to start inside DC or PG County?

12 Replies

Hi all, first time posting on BP. My girlfriend and I are really interested in trying our hand at real estate but we aren't sure where to start in terms of location. We know we want to get inside the District of Columbia but it's crazy expensive in nearly every neighborhood. We've lived in the district for a number of years and have also spent sometime in the neighboring Prince George's county. Both locations have their perks, but looking long term we feel DC can better fill vacancies. This would be our first home purchase and we'd like to leverage house hacking. We'd prefer to have a separate dwelling area but those tend to be few and far between. We're also willing to live with roommates so standard single family homes are also an option for us. Because this is our first deal we want to try to avoid a lot of potential capital expense on repairs or rehabs. We'd like to put no more than 60K down which will likely mean that we need to make use of an FHA loan.

We wanted to get people's opinions on how to go about getting off the ground. Would it be more advisable to look for deals inside DC where there asking prices are typically 500k+ on relatively small apartments or to look into PG county and purchase a newly built home that's metro accessible and costs 300-400k?

Basically, I haven't seen many people talk about buying newly built homes and renting them out in the DMV area and was wondering what people think of these buildings as potential first time break-even type real estate investments?

I have clients that only buy new construction so as to minimize problems. I also happen to live in new construction. 

The key to buying  new is buying where the supply is constrained. Dont buy in places like Clarksburg or Ashburn where there is an infinite amount of land

Cosign with @Russell Brazil . I bought a 5 year old town home as a primary residence last year and have been extremely happy. Had a conversation with my mailman earlier this week who's lived in the area for 30+ years. He lauded how much rents have grown here in PG county since then. I do feel (and hope) the areas surrounding DC will experience a lot of the similar appreciation as the market continues to mature.

Originally posted by @Mark Cruse :

Buy new construction to rent rooms? Sounds like a train wreck. 

Hi @Mark Cruse, can you expand on that? If I can get a brand new 3 bedroom townhouse near a metrostation for $300k-400k and rent out each room for $1000-$1200 a month when luxary 1bedrooms in the area go for$1400-1600, what am I missing?

 

@Isaac Passmore house hacking in my opinion is the best way to get started in Washington DC .  I'd recommend the following: 

1.) Concentrate on location. 

2.) Run the numbers to where you feel comfortable with the monthly mortgage with the roommate and it allows you to expedite your saving goals during that period.

3.) Run the numbers as it is a long term rental .  If it doesn't work now, don't buy it, don't get emotional.

4.) Use the 3-5% down loan to reduce your $$$ down and use the remaining of that $60,000 you have to start reserving for the next property or use for renovations to force appreciation!

Good luck! 

Originally posted by @Isaac Passmore :
Originally posted by @Mark Cruse:

Buy new construction to rent rooms? Sounds like a train wreck. 

Hi @Mark Cruse, can you expand on that? If I can get a brand new 3 bedroom townhouse near a metrostation for $300k-400k and rent out each room for $1000-$1200 a month when luxary 1bedrooms in the area go for$1400-1600, what am I missing?

 If you can rent a 1 bedroom condo for $1,400, would you rent a room with no kitchen and a shared bathroom for $1,200?

 

Originally posted by @Jacques Herve :
Originally posted by @Isaac Passmore:
Originally posted by @Mark Cruse:

Buy new construction to rent rooms? Sounds like a train wreck. 

Hi @Mark Cruse, can you expand on that? If I can get a brand new 3 bedroom townhouse near a metrostation for $300k-400k and rent out each room for $1000-$1200 a month when luxary 1bedrooms in the area go for$1400-1600, what am I missing?

 If you can rent a 1 bedroom condo for $1,400, would you rent a room with no kitchen and a shared bathroom for $1,200?

I guess it would depend. Assuming both are in budget for me, I would compare how much common space I would get compared to the condo.

 

@Jacques Herve how large of a difference between luxary condo and renting with roommates do you use when crunching the numbers?

 

@Jacques Herve things just sound easy and simplistic when talking about stuff but renting rooms is complicated, convoluted and can be dangerous. In addition, it wears on the home. Most who rent rooms have transient mentalities and could possibly be difficult to manage. People consistently in and out of your home seeing and doing all kinds of stuff. I know people who have rented rooms and it's great money but too many headaches. May be personal preference but it seems like so many other approaches to investing that are much cleaner. Newbies always have these great ideas that sound so cool on paper but get in and have a change of heart very quick. 

I've managed some units in College Park and Hyattsville that were rented by the room and if you can get a good group of college students it's not too bad. It's very hands-on management though as was said above (babysitting) and you need to pick tenants carefully. This is a common business model in the route 1 corridor and there are plenty of landlords doing well with it, so it's definitely possible. Even with new construction, $1000-1200 per month for one room is likely too high, though. There are some homes on the MLS right now where this strategy would work.

Rooms are not going to be rented for over $1000 unless you buy in highly desirable DC location such as Dupont Circle, AdMo, new construction in Navy Yard, Columbia Heights etc. I would suggest joining housing for rent groups on Facebook so you have an idea of what potential tenants are looking for. Hint: you will see the above mentioned locations a lot

"Would it be more advisable to look for deals inside DC where there asking prices are typically 500k+ on relatively small apartments or to look into PG county and purchase a newly built home that's metro accessible and costs 300-400k?"

If you definitely plan on house hacking, you will need to look in PG county as you can actually get something that has extra rooms to be rented out. At current price levels, it will probably not cash flow (assuming you are planning on living in the home as well) but it will offset part of mortgage. 

Keep in mind DC is very tenant friendly. PG County/Maryland in general less so but still tenant friendly. Virginia is on the other hand landlord-friendly but prices there are also higher.

Lastly, if you buy near metro station, you will have no issue finding tenants 

PPS. I would wait until after the election this year for the recession to begin, as the prices currently in DMV area are near what they were during the peak of housing boom, if that tells you something. Once the recession hits, prices will fall and you may end up in a better position

Check the landlord tenant laws before investing in DC.  If you go there you will likely want to stick with short term rentals to avoid the tenant friendly legislation.