To buy or not to buy?

Question

I've been speaking to quite a few great minds here on BP about my predicament.  I'm moving to Woodbridge, VA June 13th which is in the expensive NOVA market.  I have a place to stay till September 15th. Afterwards I have two choices,  pay 1.6k per month in rent or purchase my first property most likely with an FHA loan.  Even with FHA though I don't know that I can fund the downpayment and still have capital to fix any unexpected issues that come with ownership.  I feel buying would be cheaper than renting and would help me gain equity if I sell or cashflow if I rent it.

Here is a location I've really been thinking of making an offer on if experienced people don't caution against.

http://www.trulia.com/property/3069322370-16708-Georgetown-Rd-Woodbridge-VA-22191

Please let me know your thoughts.  If it is a deal I'm not worried about someone taking it,  I just want to learn and I think showing what I'm looking at is key to getting good advice.  Thanks in advance!

Nate Fenson · Answer

If you have never done any repairs yourself, I would stay away from any house that is sold "as-is", especially if you don't have a reserve capital to fix the issues. If it was worth hiring a contractor to fix it to increase the sales price, they would have done that already.

Eddy Dumire · Answer

The neighborhood you're looking at is a B/C area.  There has been some drug activity there, but it's not nearly as bad as further south in Dumfries or in the state street area of Woodbridge.  This area is on the edge of where you can potentially start making money in the NOVA market.  You'll notice that market rents for these townhouses are in the $1400-$1600 range.  The $1800-$1900 rentals another street over are much newer and this house is not comparable.  I don't think I agree at all with Nate's statement about hiring a contractor to fix the issues.  I often find that people simply won't pick up the phone and pay a contractor $10k to fix the issues that increase their house value by $30k.

Nick Thomas · Answer

I was going to offer about 155k-160k. I thought 176k was too high because like you said, it already went up 91k in 4 years.

Kevin Harrison · Answer

I actually rented a house in that same neighborhood when my wife and I first moved to va. It is a nice blue collar neighborhood, people take care of their yards, right across the street from a food lion and only about a mile from the liquor store. close to the 2 major roads in the area and directly across from a park and ride if you are looking to commute into DC. I would say other than the need to do a few updates and the lack of privacy that it would be a great place to live. The price seems fair seeing how the average 3b/2b town home in the area is around 220K.

Nate Fenson · Answer

Yes, but this isn't a for sale by owner property, its a "for sale by owner" by a small group of investors in real estate. They might be trying to get out of the property due to a string of bad tenants, but they are also earning 91k from what they purchased the house for 4 years ago. Properties have gone up I will admit that, but still, something seems weird about this one.

In general yes, people won't call a contractor, but investors should.

If you were expecting 1.6k max rent, then your purchase price should be below 160k to allow for your improvements to keep this a 1% property. Don't be in a rush for your first deal, stay unemotional to the property. Why do you think its worth it to break the 1% rule?

Nick Thomas · Answer

Nice seeing some input from locals. I hope to meet some of you in the near future. I am able to get things fixed via contractors at cost and have SOME experience with DIY....depends on the complexity. I was thinking this specific property would rent for 1.5-1.6k which I think would more than cover the expenses.

Rebecca Zadell · Answer

Woodbridge is also not a great area. Some parts are better than others. I'd recommend checking the crime statistics on that neighborhood first.

Nick Thomas · Answer

Ideally the plan was to househack a duplex, but it appears small multifamily homes are just a dream in this area.  The area I'm moving from had an abundance of them and I'm kicking myself for not househacking these past 3 years in the cheap market.  Thanks for the advice,  I just was not seeing how the expenses in that townhouse would exceed 1.6k monthly.

Thomas S. · Answer

Buying a home is a life style decision not an investment. Over the time you own a home, or homes, till the time the last one is paid off you will spend far more in interest, principal, maintenance and other expenses than it will likely ever be worth. Renting is a less expensive option.

SFHs are poor investments as cash flow properties and, if nothing else, get the idea in your head that parking money in a property does not increase cash flow on that property.

To buy or not to buy?

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