If you had $400k-$500k to buy an investment property – Where would you buy?

friday question
Photo by PoPville flickr user Kevin Wolf

I saw this question was on PoPville about 3 years ago. I know DC has changed a LOT since then, and a neighborhood I could afford in 2012, is probably no longer in my price range. I was able to buy a house on the edge NoMA 4 years ago and would like to buy another house in a neighborhood that will experience that same sort of change. I’m working with about 400-500k.”

Despite the fact that DC is apparently sinking, without a doubt I would buy in historic Anacostia or anywhere relatively close to the waterfront east of the river. I’m feeling very positive about long term action when 11th Street Bridge Park gets built.

92 Comment

  • Definitely Anacostia. SW waterfront. Also on GA close to Walter Reed.
    You can also find small units in Dupnt or Thomas Circle for under 500

  • HaileUnlikely

    If I had that in cash, I’d probably buy at a tax auction.

  • Petworth. Or ivy city of Brentwood.

  • 2 or 4 unit small apartment building EOTR. You’re not working with much for NE and NW prices, which are probably at peak and will stay plateaued for the foreseeable future. Got to go to a marginal ‘hood to see the type of gains you’re expecting.

    Also consider PG County. So many families are getting priced out of MC. The type of people who would have bought in Takoma Park 10 years ago can’t afford it anymore. They will eventually look to Metro accessible PG.

    • A lot of people were saying that in 2006 and are still waiting for that boat to dock. Prices have actually fallen there in the last few years. It’s still pretty risky.

    • This is the answer, at least in DC proper. The closer to Minnesota Ave/Benning Rd/Anacostia metro station the better. Those neighborhoods have mixed use development and geographically/topographically feel closer to the core of the city and they have serviceable connections across the river. Single family homes EOTR, I absolutely love River Terrace for its rive access, housing stock, and accessibility.

      If youre looking at single family homes WOTR, time is running out but North Michigan Park and Lamond-Riggs are your best bets.

      • River Terrace has got to be the most underrated neighborhood in DC. Still good, solid houses to be had under $300k (although I’m starting to see prices creep to $325k). Throw in that rare river frontage and low crime rate, and it’s a real gem of a neighborhood.

    • Given that prices are going up in NE and NW every year, I’m not sure how you can claim they’ve plateaued. I think it’s reasonable to say that the rate of increase may be slowing in some neighborhoods but imply they’re flat, and will remain so for a while, is just inaccurate.

      • i agree, and don’t understand why everyone wants to try to hit the lottery with appreciation in a sketchy neighborhood. even if the rate of increase is slowing in NW, the nominal increase can still be significant for a more expensive house: a $40K annual increase is 5% on your $800K house and 10% on your $400K house, but $40K either way. yes, you’re putting less down on the cheaper house, so you could theoretically leverage greater returns with the money saved in a lower down payment, but for individual buyers (as opposed to investors), the size of the downpayment doesn’t totally matter bc it’s just going into equity. you basically miss out on $2K annually: the extra 5% return on the extra $40K down payment) but with higher interest payments on the larger mortgage, and thus a higher tax deduction, it evens out. i think people underestimate the value of simply building equity. of course, affordability underlies all this bc most people are simply buying what they can get their hands on.

      • In some places they aren’t rising much faster than inflation, in which case there may be better investments out there (though one also has to consider the tax benefits, which can be substantial).

      • I agree. The NE edge of Capitol Hill (near where the new Whole Foods is being built on H) is poised for huge gains. No way it has plateaued.

  • The reality is that you can’t find any rowhomes in that price range anymore in any of the transitional close in neighborhoods any more. Probably Carver Langston but I don’t think you can demand rents to cover a 500K mortgage, but if you put down a big deposit Im sure you can rent it to cover montly costs. If you sit on the property- you’d probably benefit from equity in a few years. Myabe if you find a stuido/1 bedroom that you can do short term rentals, would probably generate more income, but less growth from equity perspective.

  • One really nice place in Baltimore or maybe two mid-tier places…

    • Accountering

      You would really spend $500,000 on a really nice place in Baltimore right now? Or $250,000 on two? If I am investing in Baltimore, I am going lower half of the market, and getting a few places in the $100,000 range.
      There are plenty of opportunities in DC though, so Baltimore is out for me.

      • Yeah, because once you start getting down under 200, you’re in a very speculative situation. I dont think all of Baltimore is going to rise the way DC has. Id like to find a neighborhood that has already moved forward a bit, because they’re more likely to continue moving, instead of trying to pick the neighborhood thats going to move next.

        • Accountering

          Fair enough. I have looked a bit in Baltimore, and I suppose I can get behind this. Thanks for clarifying – I agree, I am not looking to pick neighborhoods in Baltimore that are going to move, nor do I have any interest in being a slumlord.

  • Randle Circle, if you’ve got a 15+ year mindset. Mass ave bridge over anacostia will change things

  • Ideally, you should be looking to get into Takoma. Walter Reed is about to blow up, and there is a massive amount of development going into Georgia Ave in Silver Spring near by. The neighborhood has houses in this range, mostly granny houses, which can be fixed up and modernized. Add to this a significant amount of development in the area around the metro. The entire neighborhood is about a half mile from the Takoma metro as well give or take. Add to that the best access to N/S bus routes in the city short of downtown. Add to that Takoma remains one of the safest neighborhoods in the city east of the park.

    Brightwood which is nearby would be another place. But Takoma is the better option of the two, it is in a sweetspot, its both safer and has better amenity and transit access. Not every property in Takoma is in this range, many are nearing the million dollar mark, but you do have some nice bungalows and duplexes that come up around the neighborhood. Plus some nice condos right under it.

    Everything outside of Takoma and Brightwood is high risk, especially east of the river, or PG. Taking that Wegmans is already lobbying the neighborhood for a Walter Reed store, and a Harris Teeter seems likely. Add to it the developer interest along Georgia ave in Takoma and Shepherd Park has spiked and major deals and development plans are being put forth, Takoma is the obvious choice in this budgetary range.

  • Nothing in DC. Anacostia has already been bid up, years in advance of having the amenities to warrant high prices. Plus with increasing crime, metro imploding, and declining services, DC could actually start losing residents again. I’d look at Richmond, or another smaller ” up and coming” city.

    • If Metro implodes, DC will be the last place to lose residents. Imagine trying to drive from anyplace with 800k more cars on the road each day. RE that is walkable will become extremely valuable.

  • Downtown Anacostia

    • The best time to buy in Anacostia was about 2 years ago. You can still get some bargains ($200k), but they’ll cost you $100k in reno so you have to be willing to play the flip game. Also, much of Anacostia is in a historic district so you’re limited as to what you can do with a property.

    • Downtown Anacostia is where everyone’s heading, and you want to be ahead of that curve. It’s also in a historic district, which severely limits what you can do with a property.

      The investor secret used to be “follow the gays” but I think now it’s “buy near a coffeshop.”

      • All the young gay first time buyers I know (who don’t have family money) are buying in Brightwood. They like it because of the quick connections down 16th and GA Ave down to U Street, Banneker Pool, etc. That area is going to be on fire in 5 years’ time.

        Many I know are skipping Petworth (too much street harassment and concerns about safety, too expensive).

        • Lol @ skipping petworth for brightwood because of crime and street harassment. Have you been to Kennedy Ave? Or Jefferson? Brightwood will be nice one day but a safety haven in the city it most definitely is not. For god sakes there were 65 shots fired in front of the Walmart the other day.

          • HaileUnlikely

            Brightwood is much larger than you realize. I lived in Brightwood for my first 10 years in DC and went by the general vicinity of the crazy shooting that you reference a grand total of about 3 times in the 10 years. There are lots of very nice places in Brightwood – I will agree that Georgia & Kennedy and Georgia & Missouri aren’t among them though.

          • Brightwood != Brightwood Park. Most of the safety issues are in Brightwood Park, not Brightwood. If it’s south of Missouri Ave, like Kennedy St, that’s Brightwood Park. Brightwood Park does have issues, Brightwood and Manor Park which is north of Missouri not so much. Knowing neighborhood boundaries and geography really does help.

        • Yup…Brightwood and Takoma. East of the River has too many safety issues.

  • I am bullish on Laurel, MD – Howard County side.

  • I’ve seen a few small apartment buildings for sale in that range that need reno within two blocks of that Hecht’s warehouse development. They will be worth a ton in 3-5 years.

    • That train is already way out of the station. Owners there already expect top dollar. most of those buildings are in really poor shape, and almost all have tenants. With the vacancy rates elsewhere I don’t expect to see tons of demand for condos or high end rentals there for 8-10 years and that’s contingent on some infrastructure projects improving access.

    • I bought here early 2015. I got a large 2 unit in this area for less than $500K, already rented. Tenant income is approximately $1K over cost per month and should continue to rise over the next few years.

      Multiunits with multiple bedrooms in improving areas are your best bet investment wise. It is hard to find a single family in DC at current prices that will pay for itself with rental income.

  • Keep in mind you’ll get nowhere near the returns of the previous five years anywhere in the city. Most of that 20~30% gain in a few short years was the post crisis recovery. I think “hot” neighborhoods will rise at a normal 3-5% while many will be closer to 1-2%.
    To see much return you would need to rehab or be really lucky. The only out there possibility I can think of would be near the prospective purple line stops in pg county.

  • Brightwood as close to the Walter reed development as possible.

    • Interesting area. It’s now surrounded On almost every side by nicer neighborhood (takoma, petworth, 16th street heights, etc.) and the Walter Reed thing looks like it will be well done. Kennedy street is still a blighted wasteland though and that area NEEDS NEEDS transit. Other that the narrow stretch near Takoma DC its pretty inconvenient.
      Hopefully someone in the city will get a clue and realize that before 2020.

      • Kennedy street is in Brightwood Park, not Brightwood. Brightwood is North of Missouri and south of walter reed, and west of 16th St. Then east of georgia it kind of blends with Takoma and Manor Park (ill defined neighborhood boundaries in some places). But anything north of Missouri is generally pretty nice, and the good rule is the further north the better.

  • Brookland, if it’s not too late already

  • Off topic – but can someone tell me what that low curved stone wall is in the picture above. When they were building it I thought it was going to be a pedestrian bridge, but now I’m thinking that it might be something else. Thanks!

  • Close in PG County… Mt Ranier, Riverdale, Hyattsville, Greenbelt, Cheverly, and New Carollton.

    • Close in PG – Riverdale and College Park. New Whole foods plus UMD is gobbling up land up and down route 1 to make it more desirable for students and faculty. Plus you can rent to grad students with parents money – or take your chances on housing vouchers and low wage workers in some of the other areas people mention.

  • Near Walter Reed or Anacostia.

  • Near a Metro. The bargains are EOTR but the market that will drive up values is not a car-based one.

  • When you say investment property, is this a property you plan on buying a house with the intent to rent it out, then sell in 4 or 5 years, or are you looking to live in said house, but want to maximize appreciation potential?

    Appreciation might be greater in Anacostia, but I’m not sure I’d want to live there (yet), so if that’s your plan, I like the Brightwood/Takoma suggestions as close to Walter Reed as possible. Inventory up there isn’t high right now, but you can find stuff that needs work for $400-500k. It’s already a nice (if somewhat quiet) neighborhood (i.e. a nice, relatively safe place to live), but should experience a nice real estate boom when the Parks at Walter Reed happens.

  • I’m not sure if it’s too late, but SW Waterfront is probably a safe bet too, considering how much that area will be transformed in the next few years.

    • Just did a quick search on Zillow. Plenty of listings still under $500K near Waterfront.

      • most of those are in co-op communities though, correct? While co-ops have advantages, I’m not sure buying into one for an investment property is the best idea.

    • This would be my bet too. Established neighborhood, but still several affordable options given the convenience to the metro and downtown DC. Soon there will be a ton more amenities in the area too. Seems less risky to me than some of the other areas being suggested.

  • Historic Anacostia or Deanwood for sure, families are moving in and prices are already going up. I’d also consider Penn Branch or Twinning since those neighborhoods are already rising and will only continue with development around Historic Anacostia and 11st Bridge Park.

    Most neighborhoods WOTR are at peak or pretty near peak and the ones who aren’t are probably going for more then $400,000 already.

  • 1) Carver Langston
    2) River Terrace
    3) Fairlawn
    4) Anacostia
    5) Deanwood

  • I’d buy in some of the less obvious places and I would have different criteria for purchasing a rental. I’d buy a 2 bedroom condo somewhere along CT Ave near Cleveland Park or Van Ness. The area isn’t as hot, however will be in demand with parents wanting to live in those school zones, keeping a 2 bedroom occupied should be relatively easy.

    • I rent in this neighborhood I agree. Plenty of professional type renters that can’t afford a $3MM house on Macomb but want to live in the city and they have young kids in John Eaton school. Lot’s of condos and coops around 300-500. I don’t anticipate much appreciation, but you will cash flow, and depreciation is very very unlikely. I will be buying for my own residence in a year and this is my pick. When I upgrade, I will keep in portfolio and ideally rent to an AU grad student.

  • Fort Totten people. Three metro lines. Best kept secret.

    • I’m not sure that Green/Yellow counts as two lines. Ft. Totten functionally has two metro lines. That’s like how the Pittsburghese claim three rivers. It’s just two that converge into the Ohio.

      Still, though, Ft. Totten is a good bet for real estate.

      • I’m not advocating for Ft Totten, but I think that Yellow and Green do count as two lines for multiple reasons. 1) They have different endpoints (e.g you can get to both Nats Park and DCA from the same metro stop without changing trains) 2) Because there are two lines, you get trains more frequently.

        Also, when two similar sized rivers join they usually make a new river (e.g. on a much smaller scale: two first order streams joining make a second order stream). Otherwise you could say that Maryland only has two rivers: The Mississippi River and Chesapeake Bay.

        So Pittsburgh does have three named rivers: Allegheny, Monongahela and Ohio.

    • This is not bad advice, a great deal of development in the area, it is relatively safe, and houses are in the persons price range.

  • For a fun waste of 15 minutes, go back and read the comments on the 2012 link. I particularly love the many comments along the theme of “once the streetcar opens in 2013, H Street is going to Explode”.

  • If I was really in this position I would find an unrestricted plot of land in WV (just over the VA state line, about 2 hours from DC) and build as many tiny houses as my budget would allow. I think people would love to try them out for short/mid-term, or just for a novelty. You could even have them on flatbeads so that they could be moved closer or further apart on the property as needed.

    If I was staying in DC I’d probably go with Michigan Park or near Ft. Totten. Although I do like the commenter above with the idea about a desirable school district with a 2BR. I have several friends in that boat right now. Instead of owning in the city they choose to rent and then own something a second home elsewhere. You’d end up with that or young two professionals.

  • Surprised no one said Edgewood with all the development planned there. As of a few months ago, there were still some very good deals there (half the price per sq foot of places on the other side of North Cap).

    • We looked there and anything under 600k is pretty rare. The development will make things nicer but it’s quite a ways off, and Edgewood Terrace is not going anywhere anytime soon.

  • Brentwood, Langdon Park and Woodridge are where it is at. All just south of Rhode Island Ave and with a lot of redevelopment planned to bring needed services and amenities to the neighborhood. Still lots of good row houses, and Brentwood is walking distance to the metro.

    • You can still buy fixer upper 3br/2br houses in Brentwood for under 300k. You can easily put 100k into upgrades and have a nice little pad. Fully renovated houses have been going for 400-450k now.

  • Riggs. Since the mayor lives there, it’s gonna get all the attention it needs. Plus, all the development around Ft. Totten is right there.

    • That area has so much potential, but there are serious obstacles to development in the near future. You have the dump west of the station, and WMATA owns the bus loop, which I don’t think they have put out for development bids. What development is going on there looks like it’s being horribly botched – ugly, low quality, not necessarily as urban as other development, etc. I think it’s only good as a longer term investment prospect (15-20 years).

  • Baltimore.

  • I dunno, if I were a developer I’d be thinking about where all these Millennials are going to go over the next 5-10 years. DC has this huge cohort who likes urban living, makes a lot of money and is also going to have children. The reality is they’re not keeping their 5-year-old in a 800 square foot 2-br on 14th Street and they’re also not moving Isabella or Harper to Deanwood. If they have the option not to move to Bethesda, they’ll pay a lot of money for it. Developers should be thinking about what kind of developments are going to appeal to these sort of $200k+ couples and keep them from decamping.

    • i think that’s why petworth, brightwood, brookland, etc. are seeing large price rises. the dinks (or di with young kids) are moving up there bc they can actually get a house. question is will the schools be good enough when the kids are 6+ yrs old.

      • One thing to remember is a large co-hort is not going to have kids. Between 25%-50%, many of them are the ones buying houses in these urban neighborhoods. In terms of school improvement, some will, some will not.

        • I don’t disagree, but DC developers already cater (almost exclusively) to those without kids. I think the opportunity for a developer to stand out and not rush into an overcrowded idea, is to attempt to do some development around the new generation of young families (a chunk of whom have less suburban tendencies than previous generations of parents).

  • I am blown away by how right I was about Woodridge in 2012… and imagine how much money I’d have if 400k went in index funds and 400k went into woodridge. *pats self on back*

  • EOTR – Historic anacostia and Barry Farm to be exact. I just bought an end unit rowhouse for under $190k and it probably needs another $20k in reno/upgrades but since we closed, two renovated houses up the street sold and closed close to $300k.
    Yes there are safety concerns but generally if you mind yourself and are vigilant no one bothers you and my neighborhood is a mixed bag of economic status, race, sexual orientation, families with kids, young couples, solo dolos etc.
    Its more accessible to downtown and the mall than where we rented in Brookland but be prepared to use grub hub as the take out and dining offerings are pretty slim. Proximity to Navy yard and Barracks row also helps to offset the lack of quality restaurants and bars.

  • Also surprised no one said near the RI Ave metro. That whole area by Forman Mills/Big Lots is changing so quickly with houses flipping and new buildings going up. It is also right by a metro, still hugely underdeveloped, and nestled right between Brookland, Bloomingdale, and NOMA, all of which are much more expensive areas.

  • Definitely East of the River: Anacostia, Fort Dupont Park, Benning Road/Deanwood.

    Hillcrest is already a little pricey and inventory is low. But Anacostia and Fort Dupont Park have been selling like hotcakes just in the last 1-2 years.

  • One of the four unit one-bedrooms near Stadium Armory that could use the flip.

  • I moved to Fort Dupont Park over a year ago and love this neighborhood! Its beautiful, quiet, and safe! I live in a single family home with a spacious backyard and am fortunate to be next to some lovely and generous neighbors. Fort Dupont Park, which is a short walk away, is a serene retreat from the city and I often walk my dog there. In terms of public transit, you can ride the bus for 5 minutes to Benning Road Metro or bike there in 10. Most importantly, this area is safe compared to where I used to live (Truxton Circle). My car has never been broken into; My packages have never been stolen; And my block has never been roped off as a homicide crime scene. My neighbors, some of whom lived here for 50+ years, tell me that our neighborhood never experienced the trouble that the rest of the city did. That was true then and its true now.

    If you have the chance, I would definitely check out the neighborhood. Houses are going for low 300s, but we’re already seeing some houses selling in the 400s.

    • Fort DuPont is definitely a hidden gem. It’s getting pretty expensive though! More comparable to Brentwood than most other places EOTR.

  • Check out Kenilworth. It is a quiet neighborhood with large houses and a 5 minute walk to the Deanwood metro.

  • Carver-Langston, Brentwood, maybe Edgewood if you can find a smaller SFH that’s livable but without high end finishes. I think these have the most development coming nearby in the next 10 years (from H St and Brookland), and that will spill over. You mint also be able to get a livable SFH in the north part of Trinidad, which especially if you can stay closer to Union Market and all of the stuff coming up in Ivy City could see some nice appreciation.
    If you want a multi-unit building, you need to go eotr. Anacostia, Congress Hts, and the area around Benning Rd Metro is where I would look first. But much riskier IMO.

  • Arboretum. Single family 4 bedroom . No Doubt.

  • I can’t believe no one’s mentioned Cheverly…it’s like Mayberry RFD over there.

  • justinbc

    Was gone on Friday when this was asked, but just in case the OP comes back to read…
    We spent in this range last year on a property in Ivy City (4 unit building) and have already gotten significant appreciation. We got a 15 year mortgage so we could pay off and retire quicker, and even with the higher payment we still clear $2k in the black every month in rent and have no problem filling a unit when tenants have left. Granted, we were lucky enough to score a place before many of the bigger projects were announced, but you can still find many places for sale in the area under 500K. As long as you’re not too greedy out of the bat with your rental rates you will fill the spots easily. It’s not immediately near a Metro (think between 1 to 1.5 miles to a couple different stops), but for many people this accessibility is much better than the alternative of living out in the suburbs and driving in. Sure, you won’t be filling the units with hip Millennials, but very likely lower income people who take the bus to service jobs in the city every day. We were even lucky enough to get Section 8 approval for one of our units so it’s guaranteed rent at a higher rate every month.

Comments are closed.