To sell or to hold long term Property in DC

[Andrea Delgado]

Hi - 

I'm a newbie trying to make the right plan on my recent purchase. First off, let me introduce myself by saying that my partner and I bought our first rental four years ago in Alexandria, VA. I already had a house so we live in the woodbridge, va house for a number of years. We had been looking another property to buy an we didn't really have a plan in mind at first but once we started looking in DC, we can across this property in NE DC in the Trinidad neighborhood that we closed about two weeks ago. The plan is to move to this property as it will be our primary home and rent the Woodbridge house.

My question is regarding the plans on the DC house. The DC house is very livable but it has never been renovated. We bought the property for 600K. I had two options in mind. 

Option 1: To Hold 

Convert the basement to a basement apartment and rent it out and we would still live in the house. Converting the basement to a basement apartment (2bed,2 bath) my estimate is of 100K. It needs underpinning + everything else to convert it. Is my estimate too low? 

If it really costs 100K then I could rent the basement for $1800 and I would recoup the money in about 4.6 years. 

With this option, we hold the property and renovate the upstairs slowly and live there. The neighborhood is up and coming and trending to go up and years. 

Option 2: To Sell 

The property has enough land to pull permits to be converted into a 3 condo conversation. The house beside us is almost done with the construction of their 3 condo conversation. 

The option here is to pull the permits and underpin, so about 95K (50K for permits + 45 for underpinning) and sell the house to an investor with experience in year 2. We would make 87K if we sell it in two years. This number is taking into account that we would sell the property for 900K in year 2. 

What are your thoughts on this?