Anyone else investing in the DC area?

Question

I would like to get some ideas what you guys are looking for and where you think will be the upcoming markets/

I noticed in DC there are so many condos being built but is the demand there? I think the newer condos will be built but if the developers can not sell them they will try to rent them out and the older condos the owners will want to sell but they will have to sell at a lower price since now they are competing with the newer condos..

I want to find fixer uppers in the DMV but I never worked on one so I wouldn't mind finding a partner that knows how to work with them.

Robert Williams · Answer

The best investment strategies in DC are buying property flips and rental units within a mile of a metro (subway) stop.  Rental demand in DC has remained strong, even during the economic downturn and rents are high enough that finding a cashflow property is not exceedingly difficult.

I've heard the "condos are overbuilt" argument as long as I've lived here (over 10 years).  New condo sales definitely took a huge hit during the recession, but condo sales have been going strong for the past two and half years.  Unless we have another recession, I don't see condo developers being forced to convert their upcoming units to rentals.

I own several rental units in DC and I've never had to lower rents (even during the recession) and I've never had a hard time finding tenants.  DC continues to attract strong supply of college students, graduate students, young professionals, military personnel, government workers and international investors, all of whom are looking for housing (to either rent or buy).

Bobby Akines · Answer

@Tony Sepassi,

One quick, note, for large developments, you don't need to worry about those going to rentals from condos if the condos aren't selling well.  The way that the financing is structured is heavily dependent on the type of product you plan to build, as the way we calculate cash flows is very different for each.  So it is very difficult to switch the program once you've chosen a given path.  Typically this decision can be changed before the finalization of the construction loan, but after that point I'm not sure how feasible it would be.  I could be mistaken, but I haven't heard of this happening, at least not in the DC area.  Some one feel free to correct me if I'm wrong!

To second what @Robert Williams said, the demand is really based on the expected demographics, and in DC we won't see the end of the need for both for sale and for rental in the near future.  And I agree that looking near public transport is a key, with the idea being that millenials, a big market of buyers and renters now in DC, are looking to live in walkable neighborhoods.  And this is compounded by what seem to be increasingly anti-car policies by DMPED to approve projects with lower and lower parking requirements, some evening going so far as to say the DC gov. is on a crusade against cars.

Tony Sepassi · Answer

Of course any property near the metro will be a catch.  Roger it seems you are not the only one saying that the growth will continue in DC, two of my other friends have said the same.  It is just that so many developers and like you said the cranes are all over the city. lol   Maybe the older properties will lower their prices since the buyers may lean toward the newer buildings.

One thing , the coops market is not going to do well.

Roger Lin · Answer

I too am not too concerned about the potential oversupply of multifamily units in the D.C. region.  It is true that we might have too many cranes in the air right now.  There is an oversupply that is pushing down the rents a little bit.  However, if you look at all the economic forecasts (Center for regional analysis and others), you will see that the demand is going to be there for the next 15 to 20 years due to large job and population growth.  Job's will be different than the previous decade, so smaller units in multifamily, near metro will be in high demand.

Cheryl C. · Answer

Tony, I'm with you on RTC.  I actually moved there myself (downsize) last year.  Bought a TH.  I'm not too concerned about the inventory in the pipeline.  Rents and prices will be very high due to land and construction costs.  My rents are much lower.  I have one condo at RTC that I bought 12 yrs ago.  The past few years, I have been buying across the street in a conversion development - you probably know which one.  If anything, the new construction will pull us up in terms of rent and prices.  PM me if you want to talk Reston.

I have never had a problem with vacancies in nova.

Tony Sepassi · Answer

I'm Reston too. Have a condo in RTC.  I have looked at Ballston but they are to expensive.  DC market I have been looking at for over a year, I have a feeling if the stock market crashes which I know it may end of the year or early next year it will effect the housing market in the DC area, specially the developers that have been building..  I could be wrong though..

Cheryl C. · Answer

I've been investing in Northern Virginia for about 30 years.  I am mainly buy and hold.  I certainly agree with the idea of buying close to Metro lines.  I don't have a problem with condos and have picked up 10 or 12 since late 2008.  These are lower end - up to a max of 200K (but have since gone up very nicely).  I bought at 30-60% of peak prices (of, not off). You really should buy before the stations  open and also take a look at the Master Plan for the area around the new station.  You may get a windfall from a buyout by a developer if high density is planned.  I'm in Reston, but there is very high demand in Arlington (the Ballston corridor).  The numbers there just don't work for me.  I know nothing about downtown DC.

Tony Sepassi · Answer

I do recall one condo building being developed, they marketing to sell the condos but it seems they weren't getting the buyers they wanted and within a year I saw the same building being marketed for rentals.

Tony Sepassi · Answer

You may also have mold issue too, either you will see it or have to pay $$$ for someone to come in and detect it..

Talia Woods · Answer

i am considering buying a fixer-upper in the DMV area but my husband is hesitate.  there is water damage near the water damage by almost all the windows (approx. 9 to 10 windows), so that means its a roof issue.  The kitchen and bathroom  needs to be gutted.  nothing salvageable.  My question is how how much money should an investor used to gut the kitchen, bathroom and roof? is it worth the $$?

Anyone else investing in the DC area?

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