No Cashflow Northern VA

[Johnathan Le]

Hey BP,

I've been eager to enter the real estate market for a while now and have been a dedicated fan of BiggerPockets for years.

I visited a 1-bedroom condo in Ballston yesterday, and it has a small den.

After researching comparable rental prices, I believe I can rent it out for $2,700, with the lowest comp being $2,400. This would be after I’ve lived in it for a year.

Considering the current interest rate, my monthly payment would likely be $4,200 with a 5% down payment.

Another option would be to put 20% down instead making my payment $3,500.

Should I rely on the expectation of interest rates decreasing, property appreciation, and rising rental rates? This area typically sees rent increases.

I’ve been analyzing property numbers in my area, and it doesn’t appear to be cash-flow positive at the moment.

[Jack Seiden]

Quote from @Johnathan Le:

Hey BP,

I've been eager to enter the real estate market for a while now and have been a dedicated fan of BiggerPockets for years.

I visited a 1-bedroom condo in Ballston yesterday, and it has a small den.

After researching comparable rental prices, I believe I can rent it out for $2,700, with the lowest comp being $2,400. This would be after I’ve lived in it for a year.

Considering the current interest rate, my monthly payment would likely be $4,200 with a 5% down payment.

Another option would be to put 20% down instead making my payment $3,500.

Should I rely on the expectation of interest rates decreasing, property appreciation, and rising rental rates? This area typically sees rent increases.

I’ve been analyzing property numbers in my area, and it doesn’t appear to be cash-flow positive at the moment.

 To answer your questions I would not necessarily “ expect” any of those options to change in a big enough way to make up a $1500 gap anytime soon, rates might come down a little but that’s likely to still be well in into the 6’s, they could also go higher, sure the property could go up in value and rent but likely not enough to off set a 1500 a month or on the appreciation side 18k loss vs renting. If I was intent on buying right now I’d have three criteria (one of which is gonna be extremely hard to find in nova and hard but maybe slightly easier in dc, pg and parts of moco) 1. It needs to be “only” $500-700 negative cash flow that’s a range where when you factor in some limited principle paydown, mortgage interest deduction and some rent appreciation you can kind of talk yourself into buying. 2nd make sure it wasn’t “house poor” 3rd and this is most important make sure it’s a place you are willing to live in for 5+ years if need be, time heals everything in real estate but it might be longer than people think, I know a number of people who bought thinking they’d only be there for a year and now want out, but it’s hard to move after one or two years with closing costs and limited equity.