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Updated almost 2 years ago, 01/10/2023
Northern Virginia Market - Is Anyone Actually Making Money?
I moved to Alexandria, VA about a year ago and have been studying the real estate market in NOVA ever since. It's interesting listening to the BiggerPockets interviews and hearing everyone's success stories. But even after a year of listening and studying, I don't think I've been able to find any sort of strategy that works in this market besides buy and hold for 10 years.
Single family house and rent out? HA! If any seller even thinks about selling a cash flowing house, 50 offers will be in their inbox within a day. Needless to say, this doesn't exist here.
Small Multi-Family? Simply doesn't exist here. My agent said one hit the market two years ago for 1.3 million as a joke and immediately took the listing down. They must have just been testing the market.
BRRRR? This may have worked at some point. But the numbers don't make sense on any properties here. Nearly every home is a fixer upper, and with the labor costs here, you're lucky to break-even on the re-appraisal. I've been quoted for over $100k on simple projects to my house. In the upcoming years, the BRRRR will be very difficult to achieve. With falling interest rates, home prices naturally rise creating significant tailwinds for BRRRR investors. This was the case in the past 10-12 years. Now we're looking at the opposite scenario once interest rates begin to rise.
Room Rentals? Would work but its illegal in Loudon/Fairfax/Arlington county to house more than 4 tenants per dwelling. With 4 roomies, the rents aren't high enough to turn a profit.
I'm really aching to know if anyone out there in this market is cash flowing any properties and how they are doing it. If you are, can you go through some details of your deal and how you did it?
Originally posted by @Scott Matthew C.:
@Christopher Miller
I’m from Chantilly and know NOVA like the back of my hand. Consider 66 west, Route 50 West past South Riding, past Dulles Airport and there you will find opportunities. Go west of Fairfax County perhaps even to Front Royal. It’s a lot of work and a lot of traveling.
My advise, consider note investing. Ditch the actual property and learn note investing from the comfort of your home.
Best of luck and thank you for your service!
Hey brother, thank you for the message. I do think the Chantilly area is a very enticing area for appreciation and growth plays, and prices are more reasonable. Took a look at quite a few properties in the area. I couldn't find any that would cash flow, but breaking even seems possible in that area.
Originally posted by @Sean Rooks:
Seems like there are a few BP Podcast guests that are making it work in the section 8 game. I think it was podcast #356 https://www.biggerpockets.com/...
Thanks Sean. Yea I've listened to this podcast several times. I haven't done in depth research with section 8 yet. I did do an overview with the rental numbers HUD provides in the area. According to their website, they only compensate for up to 4 rooms for section 8 in the area. If they did 5 to 6 rooms for large families, the numbers might actually work. But the current rates they provide, investors stand to lose money with todays home prices.
@Christopher Miller I agree with your point; it is difficult when you start out in this area as a new investor. This market certainly works for long term hold, and hoping your returns will come as the home prices rise. Certainly most new investors do not have a team of contractors that they can use at reasonable costs or the lenders that they may have worked with that structure deals with favorable financing terms. The reality out there is different for new investors who face these hurdles. But I do think you can be creative in finding homes to buy. Sometimes for me it is ok if I can break even but knowing the property might produce good returns over the long run.
@Christopher Miller Full disclosure I am not in the NOVA market, I am primarily in the Hampton Roads market at the moment, but have done deals in PA and NYC. I would offer this, there are deals to be had in any market and each one has its quirks. Our last deal in NYC was a SFR that we purchased for just under 200K and sold for just over 650K in 36 months not a friendly market by any means.
The hurdle is finding the deal, if you are relying on a residential real estate agent to find you deals on the MLS you will be waiting a while and as you said there will be steep competition when and if you find one. Have you tried seeking out owners and offering to buy? Any relationships with wholesalers operating locally? Maybe look at the commercial Multi-Family space?
@Levi T. Great Post. I have always been intrigued about bundling up a bunch of townhouses. You mentioned you did the letter campaign "at the right time." Are you still doing that today in this market? I have tried that a little with townhouse communities and got a ton of sellers calling on it but asking for inflated prices. What has been your experience at buying them from individual townhome sellers below market value?
How about financing a truckload of these townhouses. . . You said you looked at a 105 townhouse portfolio? Would that be a nightmare to finance compared to single multifamily site with 100 units? I am just thinking you have 105 different legal descriptions, appraisal issues with so many different issues? Conventional wisdom is to go with big deals where there is less hassle vs bundling up a bunch of individual townhouses. You seem to have it down to a science so I am just curious how you pull this off? Thanks in advance for any help!
@Christopher Miller I asked this exact question during a the meetup hosted by @Adrienne Green just a couple weeks ago. Glad it's not just me. My take seems to be that, yes, there's always SOMEONE making money but in this area it is (mostly) not the small newbies. Those who appear to have found ways to wrangle millions at once can definitely make some more money though (@Levi T. Hope to see a "how I built this" blog entry some day). If I were to try here I would take @Scott Matthew C. 's advice and look west out 50, I66, and Rt 7. The trick of course is figuring out how far is too far. My solution was to go way south, in North Carolina.
Originally posted by @Evan C.:
@Christopher Miller I asked this exact question during a the meetup hosted by @Adrienne Green just a couple weeks ago. Glad it's not just me. My take seems to be that, yes, there's always SOMEONE making money but in this area it is (mostly) not the small newbies. Those who appear to have found ways to wrangle millions at once can definitely make some more money though (@Levi T. Hope to see a "how I built this" blog entry some day). If I were to try here I would take @Scott Matthew C. 's advice and look west out 50, I66, and Rt 7. The trick of course is figuring out how far is too far. My solution was to go way south, in North Carolina.
Hey thanks Evan. I feel like I'm trying to shove a square peg in a round hole getting creative about the area. I just can't find a way to legally make anything work. I bought a property here but it's just to live in. Are you remotely investing and managing or are you traveling down there?
Originally posted by @Christopher Miller:
Originally posted by @Evan C.:
@Christopher Miller I asked this exact question during a the meetup hosted by @Adrienne Green just a couple weeks ago. Glad it's not just me. My take seems to be that, yes, there's always SOMEONE making money but in this area it is (mostly) not the small newbies. Those who appear to have found ways to wrangle millions at once can definitely make some more money though (@Levi T. Hope to see a "how I built this" blog entry some day). If I were to try here I would take @Scott Matthew C. 's advice and look west out 50, I66, and Rt 7. The trick of course is figuring out how far is too far. My solution was to go way south, in North Carolina.
Hey thanks Evan. I feel like I'm trying to shove a square peg in a round hole getting creative about the area. I just can't find a way to legally make anything work. I bought a property here but it's just to live in. Are you remotely investing and managing or are you traveling down there?
We invest remotely with a realtor and PM.
I could imagine a strategy for this area where a (probably younger and single) person buys a small place with an outdated interior. He/she takes in a roommate or three, uses the extra cash to modernize the interior, then sells after two years (which I understand to be the shortest time to avoid short term capital gains taxes) and buys another place suitable for roommates and in need of work, hopefully reinvesting the gains to get a bigger place or do a better/faster rehab. Sell after another two years or perhaps refinance at the higher value and keep as a rental. Sort of a "live-in-flip-house-hack" Frankenstrategy. At some point though said person might want a family and a house that isn't under construction.
@Loid Danga Like what states for cash flow?
Originally from NOVA, so I feel your pain...
What you're describing is something I have to talk to my clients about on a regular basis. We are no longer in a turnkey world, where you can just stumble along with some money and make a living in real estate investing. You literally HAVE to do some degree of value-add. In rare situations that can be as simple as slapping some paint and flooring down, but more often now it means developing land, subdividing lots, scrape and build, etc.
If that's not your cup of tea, that's okay; the stock market is perfect for passive investors, and returns are quite good. No one will judge you for choosing not to get a second job, and honestly, you'll do a lot better than many of these real estate "gurus" here who brag about doubling their money in five years.
Originally posted by @Christopher Miller:
Originally posted by @Adrienne Green:
Hey @Christopher Miller! I love the frank honesty of your post. The struggle to find deals in NOVA and the DC area is real. I know some people who're making money with fix and flips, those are people spending a lot of time and money finding the deals, though. The other thing I see people doing is house hacking by renting out extra bedrooms. You're right it doesn't turn a profit, it effectively lets them live for cheap or free. I also see people keep prior primary residences as a rental when they move on, but most I've spoken to aren't cashflowing there. They're just counting on the appreciation.
I moved away from Northern Virginia last year in part because of the lack of real estate investing opportunities there. Now I'm in Chattanooga, TN, where the median purchase price is $230k and 2020 appreciation was 13%. I help out of town investors buy in the market here, and that's such a big thing here that the "team" exists- property managers, contractors, etc. Maybe out of town investing is your way forward?
Thank you for the post. This is the reality. Maybe the way forward is pulling a David Green and investing out of state. Very intimidating but might be necessary
I live in the DC suburbs and have built up to 40 doors in Ohio over the last two years. It’s not very hard as long as you have start up capital to brrrrr a few houses at a time. 100% property managed to boot, I just sit back and deposit checks.
@Christopher Miller I live in Chantilly, East Gate/South Riding area. Bought a new TH the last few days of 2011 for $400K on a 4% 0 down VA Loan. I refinanced into a conventional this past October, 2.75%. With the amount I've paid down, my mortgage payment is $2K/mo and there is an $86/mo HOA. Rentals on my street are getting snatched up quickly for $3000-3100/mo. This TH should cashflow $900/mo less expenses/vacancy. Self-managing and using this experience to see if property management will be something I despise or like. We are buying a new TH in Prosperity Plains (Braddock & Gum Springs Rd). That TH went up $60K while it was still mud with a layer of gravel. We plan on renting this one out when we hit 20% equity as well.
The Plan: If we can get a mostly self-sufficient tenant, we will pull out some equity to use to fund the next property, which will NOT be in NOVA. While I love my current and future THs, and they are fairly safe in the Federal Govt. bubble of our area, it is not the best market for my wife and I. We are looking at TX, TN, and coastal areas in states south of VA.
Total newb, but having lived in NOVA for 8 years, I might be able to offer some insight.
Keep tabs on the area within Annandale city limits. If NOVA had a lower-end area, this is it. But prior to doing so, check out the school ratings to ensure you’re in a good school zone.
There’s a small area of Annandale that one would think is in Fairfax . . . it’s just over the Little River Turnpike bridge, but still has the Annandale address - off Guinea Rd.
A house hack in the Truro neighborhood would be pretty easy!
The neighborhood is in a transition phase where original owners are passing away or moving to retirement homes. The houses are massive when you consider the basements, and the basements are KEY!
If you can get your hands on a house where the original owner has not made updates, and maybe hasn’t even finished out the basement, you can finish it off by easily adding 3 bedrooms, a small kitchen, and living area (all that I saw had a bathroom already). Houses that are already finished might advertise an in-law suite.
Rents runs around $3200 for the entire home. But if you make it into two residences (one family up and one family down) I think you could get $2100-$2500/family. Families will do big things to get into that school district (Wakefield/Frost/Woodson).
We considered buying in the neighborhood at one point. We could swing the house and insurance payments, but the taxes were what sent it over for us.
Hope this helps.
good luck!
Hello all I know this thread is older. I've had pretty good luck so far in northern VA I knew the cash flow was mediocre considering how much you have to put in but the longer you sit on the properties the cash flow definitely gets much better. I've been scoping out Reston Town center pretty hard and watching listings like a hawk. I live in Loudoun and mostly invest in loudoun since I saw how much development was going on 10-14 years ago. I've stayed away from Fairfax county since the prices were always just that much higher. Recently I've been scoping out some very high end condo's in Reston Town Center with 2 spaces of garage parking great amenities and walking distance to the metro and also some great tech companies. I know WFH really killed the area especially the town center as I work nearby and it's a ghost town during the week where as pre-covid is was bustling busy. I saw some condo's that go for say around $425K but sold back in the last peak in 2005 for about $525K. I feel there will be a big push to go back to the office over next few years as we have more and more layoffs, and we'll see a rebalance of areas like this with more activity. Anyone else looking in this area? I just feel at say $425k a 2 bed 2 bath condo walking distance to the metro is undervalued and could go easily back over 2005 peaks. The cash flow is decent i'd peg it about at a 4-5% cap rate of the value of the property.
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Hey neighbor! I love reston town center but haven't been there in a while. What is the foot traffic like on the weekends with the restaurants and stores etc. 4-5% doesn't sound that exciting, but did you factor in the condo fees as well?
Quote from @John McKee:
Hey neighbor! I love reston town center but haven't been there in a while. What is the foot traffic like on the weekends with the restaurants and stores etc. 4-5% doesn't sound that exciting, but did you factor in the condo fees as well?
hello! it's not what it used to be pre-covid. My thinking is more in the near future couple years from now. I think we'll slowly start to see more people back in the office most days a week as companies start RIFFING people and the availalbe jobs to work from home start to dry up. Right now it's a ghost town when I decide to go in the office. 4-5% not great but if you team that with property value increase over next few years (I think we'll see a strong rise 2-3 years from now, it will seem much better as well as if you decide to keep a partial loan the tenant will pay down part of the mortgage. I can easily see the value raising up to 50% in the next 4-6 years once we're back to probably buying treasury bonds and cutting interest rates, we all know it'll happen.
Quote from @Phil W.:
Quote from @John McKee:
Hey neighbor! I love reston town center but haven't been there in a while. What is the foot traffic like on the weekends with the restaurants and stores etc. 4-5% doesn't sound that exciting, but did you factor in the condo fees as well?
hello! it's not what it used to be pre-covid. My thinking is more in the near future couple years from now. I think we'll slowly start to see more people back in the office most days a week as companies start RIFFING people and the availalbe jobs to work from home start to dry up. Right now it's a ghost town when I decide to go in the office. 4-5% not great but if you team that with property value increase over next few years (I think we'll see a strong rise 2-3 years from now, it will seem much better as well as if you decide to keep a partial loan the tenant will pay down part of the mortgage. I can easily see the value raising up to 50% in the next 4-6 years once we're back to probably buying treasury bonds and cutting interest rates, we all know it'll happen.
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I don't think you have to worry about the office so much unless your investing in office or retail. Demand should be strong for residential in the town center just because of the lack of inventory in the fairfax area and the proximity to restaurants/entertainment. If people haven't gone back to the office by now, they probably won't be coming back by now. Companies are already starting to downsize their foot print.
Quote from @John McKee:
I don't think you have to worry about the office so much unless your investing in office or retail. Demand should be strong for residential in the town center just because of the lack of inventory in the fairfax area and the proximity to restaurants/entertainment. If people haven't gone back to the office by now, they probably won't be coming back by now. Companies are already starting to downsize their foot print.
Since you do commercial, and I know zero other than "buy it and lease it" what are your thoughts around buying medical office space around a hospital? I see multiple office space available right next to Lansdowne hospital in ashburn/sterling area. I would think having property directly across the hospital would be a no brainer and rent to some sort of medical professoinal or company.
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If you see too much space available that can be a red flag. Generally speaking though if you land a medical tenant they are generally a very sticky tenant.