Investing In Real Estate In D.C. Metro Area?

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Investing In Real Estate In D.C. Metro Area?

Benyam Ephrem
Member since 2019 · 9 posts · 2 votes

Hi, so my name is Ben and I am a 2nd-year student at the University of Maryland College Park. I'm studying computer science to become a Software Engineer (or wherever the degree takes me).

Short Background

So I've been really interested in real estate for about 1 year now. It all started when I read "Hold: How to Find, Buy, and Rent Houses for Wealth" and that really kind of sold me on how cool smart investing can be. So far here has been my self-education:

Books

  • Hold: How to Find, Buy, and Rent Houses for Wealth
  • Flip: How to Find, Fix, and Sell Houses for Profit
  • What Every Real Estate Investor Needs to Know About Cash Flow (by Frank Gallinelli) (reading currently)
  • The Millionaire Real Estate Agent (ordered today)
  • The Millionaire Real Estate Investor (ordered today)

Podcasts

  • BiggerPockets Podcast 1 - 68 (as of today)

Videos

  • Graham Stephan [since he had like <10,000 subscribers] (YouTube)
  • Meet Kevin [since he had like < 20,000 subscribers] (YouTube)

So I am a son of Ethiopian immigrants who came here about 24 years ago and I am extremely extremely lucky that we are fine financially and that my parents are paying for my college education (I really can't understand how lucky I am for that).

I have always wanted to make the most of the circumstance I have been granted and...yeah...that's why I like self-teaching myself many things and real estate has become one of my intrigues right now.

My "Plan" & Question

I've been saving up for a while and my ambition is to purchase a rental my senior year for 3.5% down using an FHA loan (no idea what this fully entails, still figuring things out) and live in it for the mandatory period and then move when I leave college and get work and keep renting it out.

I'll be looking for a place close to the university but at the same time I know that is probably hard because I once talked to an agent and he said that inventory was "tight" in the area.

So I guess my question is...should I start investing in the D.C Metro area and follow my plan of getting a rental senior year and then moving out?

I ask because when I leave college and get work I make end up in the Bay Area, New York, Seattle/Washington, etc. and I'm not sure if those are better places to start out...I really just have no idea what state the D.C. Metro market is in (but I can figure things out by talking to people I guess).

It seems like this is a looming process in front of me but I hope it happens. I'll just try to stay as educated as possible so that when the time comes I'll be ready to make good choices.

So yeah...this is my first BP post

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Ron Gallagher
Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
7y

Michael, you are kinda becoming a "Johnny One Note" with your universal strategy for everyone, no matter what their situation, which is buy in Arlington and wait for appreciation from Amazon. My suggestion of buying in College Park will get Ben in the game and get him started with real estate investing now, and maybe he will be able to eliminate his college housing costs and with a little luck he might be able to eek out a little positive cash flow. Cash flow is very possible in PG County but there's nothing he could buy in Arlington that is going to cash flow, and at his price point of $300k the only thing he could afford to buy in Arlington is a condo at River Place in Rosslyn (which is on a land lease that expires in 30 years hence the more reasonable prices).

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  • LaDonna B.
    Investor · Washington, DC · Member since 2009 · 18 posts · 0 votes
    7y

    Great question! Interested in seeing what responses you get.

    0Reply
  • Deneuve Brutus
    Investor · Woodbridge, VA · Member since 2019 · 162 posts · 64 votes
    7y

    Hi @Benyam Ephrem,

    I'm a Computer Engineer major from Florida State University. I work as a federal contractor to a company in Virginia currently as a Technical Team Lead/Sr. Software Engineer. To answer your question "should I start investing in the D.C Metro area and follow my plan of getting a rental senior year and then moving out?"

    I'd say Do It! Buy a place and rent it out while your in college to live practically for free. You have your parents support. You are very mature, understanding, grateful, understand the situation which you are currently in, see an opportunity and willing to take action.

    Here's my reasoning for saying - Do It:

    I wish I knew about BP when I was in school. There was an apartment complex that was vacant, until my last year when it was rehabbed and rented out, full vacancy because it was directly across the street from main campus. I wanted to buy it, but hadn't a clue where to start, so I never did anything regrettably. As a CS major you are in HIGH demand, and will be for the next 15 years, what I mean by that is getting a conventional loan will never be an issue. By the time you graduate, you'll have a steady source of income, with tax benefits should you choose to take 6 months off and enjoy life before jumping into the 9-5 realm for the rest of your life.

    Plus, as a student you have something most working professionals do not, TIME, use it to your advantage and learn as much as possible, via volunteering to help out an investor with a website or something else that adds value. If done properly you can have enough income to maintain a pretty good lifestyle while you shop for your dream job. 

    Good Luck.

    1Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y

    @Benyam Ephrem Do you have any money to use towards a down payment on a property?  If so, if I was you, I would buy a 4 or 5 bedroom house in College Park (where the occupancy law is up to 5 unrelated adults can live in a house) that is walking distance to the University of Maryland and move into it and rent out the other rooms and hopefully you can live for free and maybe even make a little money. I don't know where you are living while you are in college but this plan would reduce or eliminate your college housing expenses. Also, you will gain experience being a landlord by renting out rooms in your new house.

    Assuming this is your first home purchase you can take advantage of several first time home buyer programs too: https://www.nerdwallet.com/blog/mortgages/maryland-first-time-home-buyer-programs/  

    I have an investment property in College Park so I am familiar with being a landlord in the city if you have any questions. Good luck!

    2Reply
  • Kyle DeutschmannPro Member
    Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
    7y

    @Benyam Ephrem hey Benyam, welcome to BP! Im a UMD alum and know a bunch of people investing in the DMV. I would be careful where you buy near the University; this may have changed, but last time I looked into it the City banned new rentals in Old Town. That being said, I think there are definitely other areas in College Park/Hyattsville/PG county where you could house hack. I have a friend who got started that way and is now a pretty successful agent and investor in Baltimore. Would be happy to chat sometime. Best of luck, Kyle Deutschmann

    [email protected]
    0Reply
  • Kyle Jiron
    Contractor · Washington, DC · Member since 2018 · 55 posts · 43 votes
    7y

    @Benyam Ephrem welcome to bigger pockets! I can't speak to your specific questions, since I'm not familiar with the rental regulations in the UMD area. You should check out the silver spring meetup (LINK) if you want to get out and meet some more of the local area investors, who may be able to help you better. Best of luck with your investing!

    0Reply
  • Account Closed
    Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes
    7y

    Glad to see you here. My 2cents...make sure you get a woman that's on the same page as you to cut out any issues in your relationship. Not many people talk about it but it's a Stone Cold Steve Austin fact, that if things go south, a woman that understands the business is way more tolerating than a woman that doesn't. 

    2Reply
  • Benyam Ephrem
    OP
    Member since 2019 · 9 posts · 2 votes
    7y

    @Deneuve Brutus @Ron Gallagher @Kyle Deutschmann @Kyle Jiron Wow, thanks for all of the tips. I could have never thought of these things.

    @Deneuve Brutus  Ok, noted.

    @Ron Gallagher Yes, I personally will have (after this summer) enough for a down payment (at 3.5%), 1-2 points, etc. & 4 - 6 months reserve for a property up to ≈$320,000 I'm pretty sure (depending on the Loan To Value Ratio that my lender limits to). I was looking on Zillow and it is really hard to find those in the area that are walking distance. I might just settle for something that is a bike ride away maybe (I skateboard to class anyway). And ok, I'll check that link out, thank you!

    @Kyle Deutschmann Ok, I'll watch out for that. Yes, I'll look elsewhere as well.

    @Kyle Jiron Ok, thanks!

    @Account Closed Noted. I'll remember that!

    0Reply
  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    7y

    @Benyam Ephrem a great agent and someone who is active here is @Russell Brazil

    2Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    Sounds good if you WANT to stay in the DC area and work at the new Amazon HQ2 or something.  If you see yourself moving to silicon valley that would probably be a bad move to buy a place here so early in your timeline.

    Even if staying in DC area wouldn’t you rather house hack a place in Arlington near your job with 4 other tech bros than deal with managing college student tenants an hour drive each way.

    P.S. Add Scott Trench “Set for Life” to your list

    1Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y

    Michael, you are kinda becoming a "Johnny One Note" with your universal strategy for everyone, no matter what their situation, which is buy in Arlington and wait for appreciation from Amazon. My suggestion of buying in College Park will get Ben in the game and get him started with real estate investing now, and maybe he will be able to eliminate his college housing costs and with a little luck he might be able to eek out a little positive cash flow. Cash flow is very possible in PG County but there's nothing he could buy in Arlington that is going to cash flow, and at his price point of $300k the only thing he could afford to buy in Arlington is a condo at River Place in Rosslyn (which is on a land lease that expires in 30 years hence the more reasonable prices).

    3Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Ron Gallagher

    Different strokes 4 different folks!

    0Reply
  • Jesse Greaves
    Specialist · Washington, DC · Member since 2019 · 12 posts · 5 votes
    7y

    I think that Anacostia is the place to look for the Las bastion of good profits in the DC real estate market. Research a 203k loan, it may be right up your alley. PM me if you'd like more details.

    0Reply
  • Shadonna N.
    Developer · . · Member since 2014 · 520 posts · 162 votes
    7y

    Stay away from DC Section 8.  Things are changing.

    0Reply
  • Account Closed
    Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes
    7y

    @Shadonna N. how so?

    0Reply
  • Account Closed
    Real Estate Investor · Waldorf, MD · Member since 2014 · 592 posts · 320 votes
    7y

    @Ron Gallagher An old Judy Garland song.  You are telling your age.  LOL.

    0Reply
  • Benyam Ephrem
    OP
    Member since 2019 · 9 posts · 2 votes
    7y

    @Ned Carey Thank you! I will talk to him.

    @Account Closed ok

    0Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y
    Originally posted by @Account Closed:

    @Ron Gallagher An old Judy Garland song.  You are telling your age.  LOL.

    I actually didn't know that "Johnny One Note" was a song until now. I just looked it up on YouTube.... good song! lol  

    I learn so much from the BP forums haha

    1Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    7y

    @Benyam Ephrem

    As a software engineer myself. It's a bit of a problem that the markets where our talents are demanded tend to be the lowest for cashflow and landlord friendliness (in the legal system).

    The list of metros you mentioned are great places to work as an engineer. They are simultaneously rough markets with low cap rates, rent-value ratios, and tough dynamics from a legal perspective.

    There are some bright spots in the extended DC metro area. The city and nearby suburbs are pretty tapped out, if passive income is a goal of yours. Happy to talk engineer to engineer on these matters. I can introduce you to my strategies as well.

    1Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y
    Originally posted by @Trevor Ewen:

    @Benyam Ephrem

    As a software engineer myself. It's a bit of a problem that the markets where our talents are demanded tend to be the lowest for cashflow and landlord friendliness (in the legal system).

    The list of metros you mentioned are great places to work as an engineer. They are simultaneously rough markets with low cap rates, rent-value ratios, and tough dynamics from a legal perspective.

    There are some bright spots in the extended DC metro area. The city and nearby suburbs are pretty tapped out, if passive income is a goal of yours. Happy to talk engineer to engineer on these matters. I can introduce you to my strategies as well.

     Yield is a measure of risk in an asset and market. The locations best for your job, because of the income, stability of the market, educational acheivment of the populace, demand, makes those markets incredibly low risk. With low risk then comes low yields. Lower risk real estate assets tend to though outpace higher risk real estate assets due to the high demand of the asset.  Low cap rates lead to far greater wealth, and even far greater cash flow with patience. My cash on (initial) cash returns on some of my DC assets is over 50% on the properties Ive had the longest.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group546 Reviews
    WebsiteView Page
    1Reply
  • Peter Sanchez
    Real Estate Investor · Washington, DC · Member since 2014 · 236 posts · 328 votes
    7y

    It's tricky being an out of state landlord. And although buying for yourself in DC is okay, I wouldn't want to be a landlord here. You'll be an amateur landlord dealing with professional tenants where the rules are in their favor. MD or VA are better for landlords though.

    Once you're sure you'll stay here (or move) decide what you want to do.  

    0Reply
  • Jesse Greaves
    Specialist · Washington, DC · Member since 2019 · 12 posts · 5 votes
    7y

    @Shadonna N.

    Why do you think DC section 8 is a bad deal? I've had great, and above market profits with the voucher program.

    0Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y
    Originally posted by @Peter Sanchez:

    It's tricky being an out of state landlord. And although buying for yourself in DC is okay, I wouldn't want to be a landlord here. You'll be an amateur landlord dealing with professional tenants where the rules are in their favor. MD or VA are better for landlords though.

    Once you're sure you'll stay here (or move) decide what you want to do.  

     If Ben buys in College Park then he should be OK. All the city officials that I have dealt with in College Park have been very professional and helpful, it's like a small town there.  Everyone seems to know everyone. He can self manage for the two years that he has left at UMD and learn a lot about landlording along the way, and assuming he's renting rooms out to fellow students I would hope that the students haven't learned to be professional tenants yet, more than likely his roommates would be normal students just trying to get their degree.  Then in two years if Ben decides to move when he graduates he can get a property manager, or let someone live there with discounted rent to be the live-in property manager, or maybe by then bungalow.com will have expanded from DC to College Park. 

    1Reply
  • Shadonna N.
    Developer · . · Member since 2014 · 520 posts · 162 votes
    7y

    @Account Closed check out the latest changes from DCRA.  Section 8 is not a bad deal but just got to be more careful as there are 2 inspections.  Also the tenants are more likely to complain over items that are not even issues.  Those complaints could turn into fines now easy.  Amazon is going to change the landscape in terms of rentals.  DC Housing thinks that landlords have no options so they have no accountability and they think they can insult you with small rent increases.  I saw a statistic the other day that the number of evictions filings has decreased by a significant number.  The only thing changing is the tenant.

    0Reply
  • Account Closed
    Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
    7y

    @Ron Gallagher bungalow looks cool, I see they operate in Arlington, I’m gonna see what kinda of $ they offer to use the house, hopefully they structure it as a win-win with the owner and not a below market lowball.

    0Reply
  • Ron Gallagher
    Investor · Washington, DC · Member since 2017 · 198 posts · 323 votes
    7y

    @Account Closed Please report back what kind of an offer Bungalow gives you.  They don't tell you how much of a cut they take on the website, rather they just say "call us."

    0Reply
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