1031 a condo from out of state into something in DC

Washington D.C. Real Estate Q&A Discussion Forum
5yFollow

1031 a condo from out of state into something in DC

Aubrey P.
Adger, AL · Member since 2016 · 34 posts · 2 votes

I own a ski condo in Colorado, which generally breaks even as a rental or cashflows a little, but is more for family skiing than anything else. That said I think it’s more advantageous to sell and invest in another property where I can get cash flow. Also, other condos on the same floor as my place in Colorado are selling for $600-650K.

I moved to Washington DC and would like ideas generally on 1031 exchanges and investing in the area. I'm open to small commercial properties under $1.2M, multifamily properties, or a nice rowhouse, within the city in areas like Capitol Hill, U Street area, Tenley, AU Park etc, or close in exurbs (Arlington, etc.) to rent out. It's very hard to find a multifamily in a decent areas in DC proper. I could look to Ward 7 or 8  to upcoming areas that may include the advantages of an Opportunity Zone property...but I'd rather stay in a more desirable location like what I mentioned previously. I know people are buying and building in Deanwood and some of the historically more dangerous areas. Even historic Anacostia is undergoing huge development. Maybe I could buy and sit on a commercial property there?

Anyone have any good ideas? It ain't 1982 anymore and you're not going to find a rowhouse on the Hill for $50K, but any input is helpful. Maybe a condo to rent?

0Reply
21 views

Most Popular Reply

Christopher B.
New to Real Estate · Washington, DC Metro Area · Member since 2021 · 8 posts · 6 votes
5y

I absolutely agree with both @Russell Brazil and @Account Closed.  The benefit of the area is the large population of federal employees, lobbyists, law firms, etc.  It's reasonable to say the market is somewhat "insulated" relative to many other markets in the country.  I wish I could be more on board with areas like Deanwood, but, having lived in the metro area, I can't.  As I look at properties -- and I look every day -- I still tend to follow a simple rule: If I would not live there myself, I don't bother.  I'm not saying that philosophy is right for everyone, but if you wouldn't live there yourself or wouldn't feel comfortable having your children running around in the area, that's pretty telling as far as I'm concerned.  It also speaks to potential issues with tenants in the future.  

1Reply
See this reply in the discussion

8 Replies

Jump to latestLatest
  • Account Closed
    Real Estate Agent · Washington, DC · Member since 2018 · 14 posts · 14 votes
    5y

    Hey Aubrey,

    What kind of yield do you want to make on the property? The more desirable the area in DC, the more difficult it will be to produce cash flow. Investors are willing to accept lower yields in places like Capitol Hill because they are confident that those properties will maintain their value or appreciate relative to inflation. You can adopt tactics like adding additional bedrooms to a property, rehabbing them yourself, or renting them by the room, but you are unlikely to meet the 1% rule anywhere in the city. 

    Both Anacostia and Deanwood have seen home values appreciate well in the last decade and commercial development has begun to come to both areas. As long as DC continues to attract residents, they are likely to continue their growth. By virtue of its location, Anacostia offers better commutes to Arlington, Alexandria, and Capitol Hill. Deanwood has advantages in commuting to NE DC and Maryland. It's hard to say which neighborhood will do better over the long run because it's difficult to predict what public/private development initiatives will occur...and when.

    If you do not own in the area already, have you thought about using owner-occupant financing first? You could then 1031 into another property in DC or into another area entirely. You could buy property in two different neighborhoods and hedge or in two entirely different cities altogether.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y
    Originally posted by @Aubrey P.:

    I own a ski condo in Colorado, which generally breaks even as a rental or cashflows a little, but is more for family skiing than anything else. That said I think it’s more advantageous to sell and invest in another property where I can get cash flow. Also, other condos on the same floor as my place in Colorado are selling for $600-650K.

    I moved to Washington DC and would like ideas generally on 1031 exchanges and investing in the area. I'm open to small commercial properties under $1.2M, multifamily properties, or a nice rowhouse, within the city in areas like Capitol Hill, U Street area, Tenley, AU Park etc, or close in exurbs (Arlington, etc.) to rent out. It's very hard to find a multifamily in a decent areas in DC proper. I could look to Ward 7 or 8  to upcoming areas that may include the advantages of an Opportunity Zone property...but I'd rather stay in a more desirable location like what I mentioned previously. I know people are buying and building in Deanwood and some of the historically more dangerous areas. Even historic Anacostia is undergoing huge development. Maybe I could buy and sit on a commercial property there?

    Anyone have any good ideas? It ain't 1982 anymore and you're not going to find a rowhouse on the Hill for $50K, but any input is helpful. Maybe a condo to rent?

     Condos are soft right now, so you can get a condo at like a 2018/2017 price. Everything else though is scorching hot.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    0Reply
  • Lorin MonesBusiness Member
    Realtor · DC MD, VA · Member since 2017 · 20 posts · 8 votes
    5y

    Depending on what you are looking for, I have seen a few muilti-family, 2-4 unit buildings in Anacostia as of late that look like a solid investment. I would suggest the best way to maximize profitability though is to rent them out to DC housing voucher holders. Screening would be key. But the return is there. Feel free to reach out. I have seen a few over the last couple of weeks.

    [email protected]202-494-0110
    0Reply
  • Bo Pang
    Member since 2021 · 3 posts · 0 votes
    5y

    @Russell Brazil I am a trying to get my first investment property around DC-metro area. Which area would you suggest to invest for a good appreciation and a decent cashflow, and what type of property? looked a couple single-family houses in Mclean and Vienna. Their prices have jumped a lot recently, and the rent won't make up the mortgage. I am also wondering what is a reasonable expectation on cashflow in this area ? I can't find anything with 10% ROI anywhere, I am wondering if that's a realist or I am in a wrong direction.

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y
    Originally posted by @Bo Pang:

    @Russell Brazil I am a trying to get my first investment property around DC-metro area. Which area would you suggest to invest for a good appreciation and a decent cashflow, and what type of property? looked a couple single-family houses in Mclean and Vienna. Their prices have jumped a lot recently, and the rent won't make up the mortgage. I am also wondering what is a reasonable expectation on cashflow in this area ? I can't find anything with 10% ROI anywhere, I am wondering if that's a realist or I am in a wrong direction.

     Initial cash flow in any descent area will be minimal on Initial purchase. Yield is a function of risk. DC is one of the lowest risk markets in the country, thus Initial low yields on purchase.

    However part of that low risk is outsized rent growth. My IRR on properties tends to hit 25% over the course of time. Yield on cost grows every year. Ive got one property in Rockville that has initial yield on purchase, cash on cash return of about 2% when I bought it in 2009. Today my yield on cost is 38%. Initial free cash flow grew from $200 per month to $1900 per month over 12 years.

    I like the Georgia Ave corridor in DC and Silver Spring for rentals.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    0Reply
  • Christopher B.
    New to Real Estate · Washington, DC Metro Area · Member since 2021 · 8 posts · 6 votes
    5y

    I absolutely agree with both @Russell Brazil and @Account Closed.  The benefit of the area is the large population of federal employees, lobbyists, law firms, etc.  It's reasonable to say the market is somewhat "insulated" relative to many other markets in the country.  I wish I could be more on board with areas like Deanwood, but, having lived in the metro area, I can't.  As I look at properties -- and I look every day -- I still tend to follow a simple rule: If I would not live there myself, I don't bother.  I'm not saying that philosophy is right for everyone, but if you wouldn't live there yourself or wouldn't feel comfortable having your children running around in the area, that's pretty telling as far as I'm concerned.  It also speaks to potential issues with tenants in the future.  

    1Reply
  • Bo Pang
    Member since 2021 · 3 posts · 0 votes
    5y

    @Russell Brazil Thank you for your reply. It makes sense. When buying a condo, what’s your suggestion between the old ones versus new buildings?

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y
    Originally posted by @Bo Pang:

    @Russell Brazil Thank you for your reply. It makes sense. When buying a condo, what’s your suggestion between the old ones versus new buildings?

     Newer buildings will have less repairs, and have more modern features, and likely higher rent. Focus on buildings with low and reasonable monthly fees as well. 

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free