November 16, 2016
Consumer Resources – Sponsored
The local economy in Washington, D.C. depends on factors such as government jobs, businesses, and population. The number of government jobs has been flat for more than six years, while business jobs have only increased at a 1% rate. Home prices were up 4% since early 2015 due to the slowed population growth.
There are no indications that the 2016 elections are going to change the real estate markets in the capital area any time soon. It’s too early to make any predictions.
With lack of certainty about the future, is it still a viable option to invest in the Washington, D.C. area? Here are some factors that may help investors with their decisions.
Rental costs are significantly lower than home prices – Because of this, single-family rentals is a difficult investment. Only nearby areas like Loudon County, VA and Prince George’s County, MD have favorable price to rent ratios.
The city is still experiencing low inventory problems – Washington, D.C. is one of the most sought after locations in the country. People who already own property don’t want to leave it. Existing home owners have trouble finding another home afterwards, even if they do sell. Ultimately, they are stuck where they are. It’s a double-edged sword. Historically low inventory levels, according to The Boston Globe Business Report, mean that “prospective homebuyers must act quickly.” Demand isn’t even close to being met, as there appears to be insufficient new construction to do so.
Shipley Terrace (formerly Randle Heights) might be worth looking into – This neighborhood has a high gross rental income returns at nearly $82,000 against a $1,000,000 investment, and features a purchase price of $229 per square foot.
Keep in mind that home prices are actually in line with local income, even if they are fairly high – This means that mortgages are not as risky as some might think. Moderate increases over the next couple of years will build equity cushions.
The slowest growth is in Fairfax County – While there is a bit of a market in the rental units, there is none for single-family homes. There could end up being an excess of housing, which results in higher risk for mortgages.
There are some house-flipping opportunities throughout the metro area – Even with the low inventory problems, investors who can afford the initial investment as well as renovations might have some success – particularly around Capitol Hill and surrounding neighborhoods like Bloomingdale. There is a lot of potential value in converting a row house into several condos sharing a common stairway.
Commercial investment is also an option – Corporate trade opportunities through organizations such as Sherwood Integrated Solutions also allow for investment opportunities in unused or underdeveloped commercial buildings and properties. This is something businesses interested in corporate bartering might be interested in doing. Some companies can’t afford office vacancy rates in the District and others are looking to snatch them up for real estate purposes.
While it is still possible to profit from existing real estate investments in Washington, D.C., profiting from new investments is difficult. Still, there are opportunities such as house flipping in certain neighborhoods and collaboration with a barter company. The Washington Post explains that a crucial component in flipping a home is “coming up with the right renovation strategy.”