MLS / off-market DC or down south

[Agyei Axum]

Hi BP,

So a friend and I are ready to pull the trigger on something. We are looking in the range of no more than $650k and are looking to find a solid first joint investment. We are currently in DC at the moment and are aware that since Covid the job market here has probably changed and will probably change for the future. A study ‘said’ that’s lots of people left the city probably due to the job market moving virtual and expensive housing. Regardless , we had always looked at DC as an equity play. Never really expecting to cash flow. Some would say this isn’t smart..but I can see both sides. We are also looking at multi family in Atlanta , Tampa, Dallas, and some other south Florida and Texas markets. The other option is off market…which we don’t have experience in but are willing to gain some and research. So all that to say , we’re kinda in crossroads now looking where to go. Do we grab a duplex in DC and bank on equity since we will probably break even or have to pay a little? Do we look and research off market DC and battle with cash investors ? Or do we look in Atlanta , South florida , texas markets? Which we are not really pinned to but are appealing to us. Hope this all makes sense. Thanks in advance .

[Russell Brazil]

Did the population of DC technically decrease? Yes....but it is also a little misleading.  Essentially the same amount of people who left DC every year continued to leave. The normal cycle of people having kids and moving to the suburbs for instance, and other instances of natural out flow continued as normal.  What did not continue as normal was the replenishment of that population with young individuals moving into DC to take 1st jobs and internships, since so many businesses were closed, went virtual, and didnt hire on that low level employees and interns. 

Even with that inflow interruption, we are only talking about a net change of a few thousand people in a city of 800,000 and a metro of 6 million people.

DC has been for several decades now, one of the lowest risk markets in the entire country, and will continue to be for the foreseeable future.  While most people think government when they think DC, the workforce is actually very diversified.  Goverment, private sector legal, and private sector tech workers each make up almost equal amounts of the work force with each of those 3 sectors having between 11-13% each of the work force.  The DC area has the highest incomes in the country with 11 of the 25 richest counties in America in our metro area.

While DC has a very low INITIAL yield or cash flow, we get strong steady rent growth. So with just a few years patience, you can cash flow much more in the DC area than in an actually cash flow market.  Ive got 1 property that cash flows $2,000 per month here right now.....but when I bought it 12 years ago, it broke even. Now 1 single year of cash flow on that property pays me back 60% of my entire down payment. Eventually it will pay me back 100% of my down payment a year. 

The key is patience, and being able to think 4 dimensionally, focusing on how the asset and market performs over the course of time.