Need some advice! - NOVA Market specific

[Jimmy Nguyen]

Hey everyone!

I'm trying to get some insight on what I should do with my next real estate move

Current situation:
I just bought my perm residence a few months back, I put 15% downpayment, will have 20% by next year.

I am looking to see how I can get a new rental property.

Choices:
1 - Refiannce on the new property and use money to make a downpayment on a new property
2 - Save up 20% for a new property
3 - Try to quliafy for FHA loan

I am wondering mainly in NOVA because our market is tapped out, is it even a good time to buy right now when everyone is saying the bubble will burst? With the market prices so high, making any money off of rent to pay for the mortgage is either break even or make $100 or so, so is that even worth the risk?

I see a lot of people use the BRRR strategy but I just don't know if it really works in our area.

I was thinking of looking outside of the NOVA market and maybe go though MD etc but I don' t know the area as well and do not have partners etc in those popular areas of interest like Bmore.

Any advice would be much appreciated!

Jimmy

[Russell Brazil]

@Jimmy Nguyen I am a local Realtor and an investor myself. One thing to keep in mind though when talking to a Realtor about seeking an investment is knowing what you are seeking in an investment property.  I own a number of different properties and they work as investments in different ways.  I have properties that meet the 1% rule and are good cash flow plays. But I also own properties that come nowhere close to the 1% rule, and dont cash flow at all. That does not necessarily make them bad investments, it is just a matter of how I am getting my return. With those types of properties I am often looking for appreciation as well as principal paydown. Many Realtors who do not invest themselves are looking more at the appreciation and debt paydown, and dont fully understand the cash flow side of things.  

I agree with @James Green that PG county offers some very good opportunities when compared to the DC metro area at large. Flippers in particular are doing well in PG county as there is a large spread between nonrehabbed and rehabbed homes..particularly in areas like Hattsville, Laurel, Riverdale, Bowie, Lanham. Laurel also offers some very attractive cheaper cash flow plays. Frederick, Germantown, Gaithersburg are also going to offer some nice cash flow oppurtunities in the condo market.

NoVa isnt nessecarily a bad area to invest...but the play is mostly going to be appreciation and debt paydown, which is going to be the case in NW DC, and really much of NE DC these days.  SE on the south/east side of Anacostia river will offer some cash flow.

Although back to one of your original questions....keep in mind with only 15% equity you will not be able to do a cash out refinance. You also can not use an FHA loan for an investment property. Your best bet is to save the money for a down payment. Also keep in mind a lender is going to want to see reserve funds in the amount of 2 months for your primary residence and 6 months for the investment property. (Possibly more depending on FICO scores). You could also look at some of the few owner financing deals that hit the market. They are not that common in the DC area but they do come up occasionally.