If you’ve thought about investing in the DC real estate market, you’re not alone. Many of us read about investors who are capitalizing on rental properties in the region.
The reality, however, is that you need to be knowledgeable and educated on what you’re doing in order to succeed. Yes, there were investors that got lucky when they bought at record-low prices four or five years ago. But today, it’s much more difficult to get a loan and there are many caveats the average home buyer is not aware of.
If you’re considering investing in the DC real estate market, you should be aware that:
- You’ll need a hefty down payment. The rules are generally different for an investment property versus buying your own house. Private lenders will typically cover about 60 to 70 percent of the property cost, so that will require a 30 to 40 percent down payment, which will sometimes prompt a newbie to reconsider.
- If a price seems too low to be true, it probably is. When you see an extremely low price tag, there are usually some hefty strings attached. A remarkably low price could mean the property in question is a co-op, which are extremely difficult to rent out. Co-ops also require expensive monthly fees, sometimes reaching $1,000 a month. And another challenge: the owner is sometimes required to actually live in the unit.
- Being a landlord in this market is hard work and not for the faint of heart. Many of the laws favor tenants. For starters, a business license is required, you can’t discriminate based on income, and the eviction process is long and tedious.
- If and when you decide to sell, it can take months and months. You can’t sell until you receive a signed affidavit from the renter. The renter can hold up the process by signing their rights to a third party and ignoring your notices.
- The laws aren’t in your favor when it comes to the security deposit. If it’s determined you did anything wrong in terms of security, you’ll be required to give the tenant up to three times the amount of security. And if they want to sue you, they probably will; it costs them next to nothing to file a claim against you in small claims court. The court process can be drawn out and will cost you time and money.
- Just because you ask a tenant to leave when the lease expired doesn’t mean they have to. In fact, if they keep paying rent, they’re allowed to stay, under the law.
Despite the challenges, there still is money to be made at investing in the D.C. real estate market. The best thing to do is find a real estate agent who is knowledgeable in real estate investing. While being a landlord can be a frustrating process, it can still be lucrative with the right real estate agent to guide you.
"Thanks for reading! I’m passionate about empowering home buyers and sellers with professional advice and unbiased information, throughout the real estate transaction. Unlike most agents, I always put clients first. When it comes to negotiating, marketing homes, and sealing the deal, I’ve got the experience and knowledge you’re looking for. If you have any questions about moving to VA, D.C., or MD, don’t hesitate to reach out."