Northern Virginia Market - Is Anyone Actually Making Money?

39 Replies

I moved to Alexandria, VA about a year ago and have been studying the real estate market in NOVA ever since. It's interesting listening to the BiggerPockets interviews and hearing everyone's success stories. But even after a year of listening and studying, I don't think I've been able to find any sort of strategy that works in this market besides buy and hold for 10 years.

Single family house and rent out? HA! If any seller even thinks about selling a cash flowing house, 50 offers will be in their inbox within a day. Needless to say, this doesn't exist here. 

Small Multi-Family? Simply doesn't exist here. My agent said one hit the market two years ago for 1.3 million as a joke and immediately took the listing down. They must have just been testing the market. 

BRRRR? This may have worked at some point. But the numbers don't make sense on any properties here. Nearly every home is a fixer upper, and with the labor costs here, you're lucky to break-even on the re-appraisal. I've been quoted for over $100k on simple projects to my house. In the upcoming years, the BRRRR will be very difficult to achieve. With falling interest rates, home prices naturally rise creating significant tailwinds for BRRRR investors. This was the case in the past 10-12 years. Now we're looking at the opposite scenario once interest rates begin to rise.

Room Rentals? Would work but its illegal in Loudon/Fairfax/Arlington county to house more than 4 tenants per dwelling. With 4 roomies, the rents aren't high enough to turn a profit. 
 

I'm really aching to know if anyone out there in this market is cash flowing any properties and how they are doing it. If you are, can you go through some details of your deal and how you did it?  

@Christopher Miller

My uncle lives in downtown he moved there for job reasons. The house being rented is beautiful right on king street it's small and it's almost a million dollar property. They pay around 3500 a month. Seems like alot but for a property almost worth 1 mil that dosent even come close to the 1% rule.That's a tough market.

What you are describing has been the case in Northern California for 20+ years.  People who stretched to buy for ridiculously high prices in the 1990's are now overwhelmingly affluent based on the steep rise in home prices as their purchases typically sell today for 3 to 5 times the purchase price (well ahead of the rate of inflation in those intervening years).  Of course, past performance does not guarantee future success.  But looking at NoVa's growth over the past 40 years (I lived there briefly in 1983 and again in 1992), it's hard to imagine a confluence of events that's not going to make that area increasingly attractive to people who have money to buy.   

So, what is working for us today are fix and flips as retail buyers will pay for truly turnkey homes with high end finishes.  The secret is to team up with contractors (i) who understand the value of repeat business and set their prices for you accordingly and/or (ii) are willing to work for a piece of equity so that your incentives aren't completely misaligned or (iii) are new and hungry.  For example, for a new roof on a recent flip we completed earlier this year, we were quoted $35,000 by one outfit and got the work done for $16,000.

       

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

Originally posted by @Levi T. :

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

 So Levi, your profile says you're in Tucson. Did you buy those deals in NOVA? And what's your strategy? Fix and flip? 

Originally posted by @Christopher Miller :
Originally posted by @Levi T.:

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

 So Levi, your profile says you're in Tucson. Did you buy those deals in NOVA? And what's your strategy? Fix and flip? 


I live in Tucson in the winter, DC when I feel like it, and Nice France the rest of the time.. I own hundreds of townhouses in the DC region, as well as multi family. I cut my teeth and built my fortune on the DC market. If you go to Del Ray North, you can find deals just walking down the street. Seen one the other day off Aspen St with a tree growing out of the gutter. 

Originally posted by @Levi T. :
Originally posted by @Christopher Miller:
Originally posted by @Levi T.:

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

 So Levi, your profile says you're in Tucson. Did you buy those deals in NOVA? And what's your strategy? Fix and flip? 

I live in Tucson in the winter, DC when I feel like it, and Nice France the rest of the time.. I own hundreds of townhouses in the DC region, as well as multi family. I cut my teeth and built my fortune on the DC market. If you go to Del Ray North, you can find deals just walking down the street. Seen one the other day off Aspen St with a tree growing out of the gutter. 

 Well thanks for your post. Definitely noted! 

Originally posted by @Levi T. :
Originally posted by @Christopher Miller:
Originally posted by @Levi T.:

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

 So Levi, your profile says you're in Tucson. Did you buy those deals in NOVA? And what's your strategy? Fix and flip? 

I live in Tucson in the winter, DC when I feel like it, and Nice France the rest of the time.. I own hundreds of townhouses in the DC region, as well as multi family. I cut my teeth and built my fortune on the DC market. If you go to Del Ray North, you can find deals just walking down the street. Seen one the other day off Aspen St with a tree growing out of the gutter. 

Holy mackerel, hundreds of townhomes in the DC region. How did you get to a place like that?  BRRRR alone sounds like it would take too much time to amas that much volume in a portfolio.

In your situation are you trying to finance as owner-occupied or as an investment property? Lower borrowing rate and cost to close on the place if you're buying as your primary, and then you could rent out your old place. Surely you can at least break-even on the old house's PITI on that. Wait a couple years and level-up with now two rental properties.

Hey Christopher. Have you tried building out of state? I had a similar issue when starting about 8-9 years ago in NJ and built a good size portfolio in PA. Now its much easier with zoom to be able to network and build at distance. Sure, trust has to be built. But that's in every case regardless of distance. I live in NJ but invest in multiple states now because NJ is similarly overpriced and overbid. 

@Christopher Miller

Have you increased the radius where you are looking? It seems development has been spreading south along the 95 corridor for awhile. Perhaps there is value to be found while capturing eventual appreciation there.  There is quite a contrast in prices when you open up the search area, an hour or more away. It's kind of crazy, even 45 minutes away in a rural area, a multi family is half the cost with 12 times as many units compared to a single condo in Alexandria for instance. Not apples to apples for sure but the contrast at less than an hour away is remarkable.

Originally posted by @Reid Chauvin :

In your situation are you trying to finance as owner-occupied or as an investment property? Lower borrowing rate and cost to close on the place if you're buying as your primary, and then you could rent out your old place. Surely you can at least break-even on the old house's PITI on that. Wait a couple years and level-up with now two rental properties.

Breaking even may be possible with a 20% down payment owner financing. But i'm looking to grow my income, not make appreciation plays. 

 

Originally posted by @Alex Forest :
Originally posted by @Levi T.:
Originally posted by @Christopher Miller:
Originally posted by @Levi T.:

It's a tough market, always has been, and now we are in a record breaking supply issue nationally.. so yeah. BUT, BRRR still works just fine.. You are competing with folks who have decades of building networks and methods to gain access to what you want, long before it's even in the market. I bought 5 deals in December easily for 60c or less on the dollar. Then things really pumped, and I moved onto other types of deals... 1% of re agents control 80% of the market. If your going to use agents, you have to find those 1% agents, and pay them better than anyone else. You can quit, and let others win, or you can become the winner. The current winners want everyone to quit.

 So Levi, your profile says you're in Tucson. Did you buy those deals in NOVA? And what's your strategy? Fix and flip? 

I live in Tucson in the winter, DC when I feel like it, and Nice France the rest of the time.. I own hundreds of townhouses in the DC region, as well as multi family. I cut my teeth and built my fortune on the DC market. If you go to Del Ray North, you can find deals just walking down the street. Seen one the other day off Aspen St with a tree growing out of the gutter. 

Holy mackerel, hundreds of townhomes in the DC region. How did you get to a place like that?  BRRRR alone sounds like it would take too much time to amas that much volume in a portfolio.

Tenacity I suppose. Why not just send a few hundred thousand letters to people asking if they want to sell their house. Someone will call... Especially if you do it every month for 10 years. They will know and curse your name, but someone, somewhere, will sell you their property eventually.. Most call it driving for dollars, I just took it a step further at the right time, maybe a little too far, but I wanted hundreds, not dozens of deals. Bigger problem will become how to finance it... You upset the apple cart, and the banks will lock you out as they don't like people moving that fast. If you figure that out, then the bank will just do the deal making for you, and get their clients to sell you their portfolios long before it would ever go to market, because they get the loan org fees. Basically I pulled a BlackRock asset management bootstrap version, at the same time they where doing it... Two weeks ago I was in Norfolk trying to buy 105 townhouse portfolio off of some guy, did't workout.. Month before that I was sending around 10,000 letters to targeted properties per week in Texas, chipping away at deals. Now I'm packing my bags to fly to Oklahoma City to put eyes on about 200 units over multiple multi family deals I put offers on. If everything goes as planned, I'll be the new owner of said units in a few short months, and keep on keeping on with the BRRR. If you try hard enough, anything is possible!

Hey @Christopher Miller ! I love the frank honesty of your post.  The struggle to find deals in NOVA and the DC area is real.  I know some people who're making money with fix and flips, those are people spending a lot of time and money finding the deals, though.  The other thing I see people doing is house hacking by renting out extra bedrooms.  You're right it doesn't turn a profit, it effectively lets them live for cheap or free.  I also see people keep prior primary residences as a rental when they move on, but most I've spoken to aren't cashflowing there.  They're just counting on the appreciation.

I moved away from Northern Virginia last year in part because of the lack of real estate investing opportunities there.  Now I'm in Chattanooga, TN, where the median purchase price is $230k and 2020 appreciation was 13%.  I help out of town investors buy in the market here, and that's such a big thing here that the "team" exists- property managers, contractors, etc.  Maybe out of town investing is your way forward?

Originally posted by @Alex Forest :

@Christopher Miller

Have you increased the radius where you are looking? It seems development has been spreading south along the 95 corridor for awhile. Perhaps there is value to be found while capturing eventual appreciation there.  There is quite a contrast in prices when you open up the search area, an hour or more away. It's kind of crazy, even 45 minutes away in a rural area, a multi family is half the cost with 12 times as many units compared to a single condo in Alexandria for instance. Not apples to apples for sure but the contrast at less than an hour away is remarkable.

I think Im going to start. I have noticed how drastically prices decline when you move out of fairfax and Loudon county. I was looking for a house hack here that would eventually cash flow when I moved out. But that's not very do-able.

 

Originally posted by @Adrienne Green :

Hey @Christopher Miller! I love the frank honesty of your post.  The struggle to find deals in NOVA and the DC area is real.  I know some people who're making money with fix and flips, those are people spending a lot of time and money finding the deals, though.  The other thing I see people doing is house hacking by renting out extra bedrooms.  You're right it doesn't turn a profit, it effectively lets them live for cheap or free.  I also see people keep prior primary residences as a rental when they move on, but most I've spoken to aren't cashflowing there.  They're just counting on the appreciation.

I moved away from Northern Virginia last year in part because of the lack of real estate investing opportunities there.  Now I'm in Chattanooga, TN, where the median purchase price is $230k and 2020 appreciation was 13%.  I help out of town investors buy in the market here, and that's such a big thing here that the "team" exists- property managers, contractors, etc.  Maybe out of town investing is your way forward?

 Thank you for the post. This is the reality. Maybe the way forward is pulling a David Green and investing out of state. Very intimidating but might be necessary

Northern VA would the hardest area to pull this off. Why not open the radius up a bit? You know there are way more probable chances of achieving this in Maryland and parts of DC.

@Christopher Miller

I’m from Chantilly and know NOVA like the back of my hand. Consider 66 west, Route 50 West past South Riding, past Dulles Airport and there you will find opportunities. Go west of Fairfax County perhaps even to Front Royal. It’s a lot of work and a lot of traveling.

My advise, consider note investing. Ditch the actual property and learn note investing from the comfort of your home.

Best of luck and thank you for your service!

Definitely buy and hold in the area is the only way. I have been looking for a property to flip and its just impossible to find something. Even off market deals are going above asking price with multiple buyers. 

I purchased a 2bed 2bath condo back in 2014 in Alexandria, VA for 130k and I was able to pay it off in 5 years by saving a lot. Finally, I am seeing the returns on it because it is renting for $1700 / month and its valued at $235k as of today. So its definitely a buy and hold game in this area. Good luck with the investing journey!!

I’ve also been struggling to find deals in the Northern Virginia area. Properties are going for above ask with some going for over 80k of the original listing. It’s crazy!

Maybe we can create a mastermind for newbies in the area to share ideas and discuss new creative options. Let me know what y’all think!

@Samir Patel There's a meet up group in the area that I am a part of as well. Its very easy going and definitely recommend to just connect with newbies and experienced investors in the area NOVA REAL ESTATE INVESTORS NETWORK

Originally posted by @Aj Parikh :

@Samir Patel There's a meet up group in the area that I am a part of as well. Its very easy going and definitely recommend to just connect with newbies and experienced investors in the area NOVA REAL ESTATE INVESTORS NETWORK

That's awesome! Will DM you about that.