Washington, DC Success Story - SFH, Vacation rental

[Chris Mylan]

I have two main goals of posting today 1) To let folks know that it is possible to successfully invest in higher priced cities with little money out of pocket, and 2) To build relationships so that I can partner with other individuals and acquire properties that perform at or above a 12 percent Cash on Cash return (whether through private lending or a structured partnership).

Since moving to Washington, DC six years ago, one of my major goals was to break into the RE investing space with a buy and hold property. With the costs to enter this market, this proved to be easier said than done; however, five months ago, I successfully bought, renovated, and rented my first DC property.

Here is that story-

Before getting further, I have another property in Pittsburgh, so I had some experience going in that made this possible. That post can be seen here:

https://www.biggerpockets.com/forums/223/topics/37...

I had been looking for a property in DC for a few months, probably searching and quickly running the numbers on over 1,000 condos and SFHs online and personally viewing ~30 houses/ units. The market is expensive, so the numbers really have to work as an investment. For that reason, I was only viewing three and four bedroom units as rents could cover (and hopefully exceed) the various expenses. I found a SFH in the Columbia Heights neighborhood listed at $625,000 three bed (and an English basement), three full bed and acted. It's a 10-minute walk to the subway and accessible to many restaurants, shops, bars, and I would call it a B+ neighborhood.

As an aside, it's nearly impossible to get a small multi here. Bigger fish investors pay higher than asking and cash for those properties. Short of getting inside information, I was priced out of that often profitable market.

Eventually, the agents, owner and I worked out a deal where I would pay $635,000 for the property, but he would cover $35,000 in closing costs along with some repairs before I moved in. This was advantageous because I could put down less liquid capital. I also bought through an FHA loan, so I ended up spending only ~$25,000 to acquire this property.

Time for the renovation - the two upstairs floors were manageable; time, effort, a lot of paint, and some minor fixes (thanks YouTube!) got the three bed, two bath rent ready. However, the basement was a disaster - asbestos floors, some plumbing and appliance issues, holes in the wall, etc. It was almost a complete gut job. However, in the end I think it turned out great!

Overall, I spent ~$15,000 to renovate the entire house. This does not include the many, many hours I put in myself, but it was well worth the time and effort after it was all said and done (while working a full time job I might add).

Today, on a per month basis, I collect roughly $6,000 -$7,000 in rent and have on average $4,000 in expenses - not a bad cash on cash return. This includes the $1,300 I "pay" myself to live in one of the bedrooms (that's what I was renting at before). And utilities are split four ways to keep expenses low.

One major advantage to living in such a transient, tourist-popular destination is the money I have made through AirBnB and other vacation rental sites. I rent out the English basement and one of the upstairs bedrooms on these platforms. Some months, I am getting 2.5x the amount of income from a traditional long term tenant. Yes, there are more costs such as furnishing, cleaning, management, etc., and I do most of the cleaning myself (but have used crews when I cannot get out of the office), but the profits far outweigh any costs or time I put in.

Thank you for listening to my story and if you have any questions, would like to dig into the numbers more or see pictures, please feel free to message me. I look forward to the community’s feedback and meeting like-minded people!

-Chris Mylan