Good Deal or Not? “Excellent opportunity for moderate income and first-time homebuyers” edition

by Prince Of Petworth December 16, 2013 at 1:00 pm 25 Comments

1425 T Street Northwest

This unit is located at 1425 T Street, Northwest:


The listing says:

“Great opportunity to live and own in one of DC’s HOTTEST areas. This 2 bedroom unit offer 817 sq ft in an awesome cooperative building with a beautiful view of Monument. Purchase price includes underlying mortgage ($68,375)…you pay as little as $42,000 to own! Income Restriction ($67,000 or less for 1 person). Excellent opportunity for moderate income and first-time homebuyers.”

You can see more photos here.

This 2 bed/1 bath is going for $110,375 ($1,285 monthly fee.)

  • cam

    I’m curious about how these income restricted purchases work. Let’s say you’re presently a graduate student with practically no income, but you’re getting a PhD in a subject that’s likely to produce a six-figure income once you graduate in a few years. Or you’ve chosen to work in the low-paying non-profit world for a few years after getting a coveted Ivy League degree. Do such persons qualify? If so, it seems like the idea of being certain that this condo is going to someone who really needs affordable housing is ruined if someone like this with significant potential income quickly moves on to a well-paid career. I assume they would be eventually forced to sell to someone else who meets the initial income restrictions, but if they remained in place with such a small mortgage, what a windfall, right? And are there rental restrictions? If not, you could easily rent the unit and make a nice profit while living elsewhere, no?

    • Anonymous

      If you’re going to make 6-figures in a few years, you won’t want to be living in a DC co-op (even if your income is low now). Bc I doubt the co-op would be approving a rental for an owner who just moved in a few years ago and is now earning way above the income limit. That is, if they even allow rentals at all.

      • Anonymous

        why not?

        • 17thSter

          I live in a coop now with rental restrictions and I’m fine with it because it is my home. I plan on staying for awhile and sell when I want to move on. Not everyone needs to be a land lord. A two-bedroom for that price is great if you understand and are ok with the restrictions.

    • Anonymous

      What you’re saying is true and happens all the time with low-income housing. That said, you’ll need to check the coop docs. There’s probably a limit on how long you can rent it out (i.e. 1 year max), if they even allow it at all.

      • Trixie

        Uh, I had a two bedroom to myself for a bit. I worked from home. You may call it extravagant, I call it necessary to have a home office to skype from where people couldn’t see my bed or kitchen. Not every situation works for everyone.

    • Anonymous

      Or pretty much any recent grad. Is preference given to families? There’s no reason why a childless person or couple would need two bedrooms.

      • Anonymous

        $67K is the limit for one person. If you have kids or a spouse, the income limit goes up higher. They are advertising one person on PoP’ville because of this site’s demographics (young, single people). But I guarantee that they will consider families.

        • Anonymous

          I mean why set aside an entire two bedroom for a single person in the first place? I make more than $67k but I think even a 1-bedroom is extravagant, especially in this location.

          • Anonymous

            I don’t think it’s set aside for a single person as much as it is available for a single person to purchase. Many people are purchasing what they regard as long term homes, aware that their circumstances may change. If I purchase a two bedroom apartment today, and next year give birth to twins, I will be very glad that I won’t have to move to comfortably house my family. It’s perhaps a different mindset from that of a recent college grad who comes to DC for work, and sees real estate as relatively temporary housing and/or as an investment.

    • Anonymous

      I’ve looked into properties like this (I’m $10K under the income restriction for one person, plus I have a dependent child) and yes, there are tight restrictions on resell and on renting it out. Many places only allow you to rent it out for a year maximum in a 5 year period. In addition, when you sell, you have to follow the same income restrictions (generally adjusted a bit for inflation).
      Plus, even though the price is very low, it’s hard to get loans for a co-op and it’s hard to save up for a substantial down payment when you have a low income, which further restricts your loan options. I know that when I looked into something similar last year, the fact that it was a co-op meant that I wasn’t eligible for FHA loans. So it’s not quite as simple as it seems on the surface.

  • Anonymous

    Income restrcitions are based only on your CURRENT income. So yes, its feasible that your income could drastically change but if you bought it, they won’t kick you out. There are bigger issues though which would be other restrictions such as being able to rent it (either restricted by coop or by the low income home buying program), or restrctions on what price you could resale the unit. A lot of these places don’t allow you to accrue equity because they force the unit into affordability for 20 plus years. Its kinds of a mess. Good intentions, just no real thought to the long term implications.

    • annonny

      As the saying goes, there’s a cost to everything. Income restrictions on the purchase also apply when it’s time to sell, so for folks with a potential for high future income, there’s the downside of making little to no profit in a hot real estate market. Also, income-restricted co-ops often have trouble maintaining the common areas and paying for common services, which in old buildings can include heat, hot water, and even the electricity if it’s not separately metered. Not saying this is a bad deal, but prospective buyers need to proceed with caution.

  • Anonymous

    PP here. And I lived in a building iwth income restricted units. Very nice neighbors but hell of a time getting condo fees paid on time. If at all. There was a real disconnect between understanding that condo fees are on par with paying the mortgage. I think the non profits who helped folks didn’t go far enough on teaching this to a lot of folks. really rough going in the building to deal with several thousands of unpaid fees for years.

  • Roger

    This is worse than condo living. Not worth the hassle unless you are legit going to need “affordable” housing and don’t care about any type of investment. This would be perfect for a person who isn’t able to buy a house, or don’t see buying a “real” house in their future; a forever renter. You make little to no money after “selling” your co-op.

    Not for me.

    • Anonymous

      Still, way cheaper than an apartment for this location.

    • Anonymous

      If the listed monthly mortgage payment of less than $500 is anywhere close to accurate, then you’d be saving 1000-1500 per month on housing. Live there for 2 years and you’ve likely saved more than you would by buying and selling a condo in the neighborhood.

    • Anonymous

      You would be paying the $1,300 co-op fee plus the $500 per month mortgage payment to finance your purchase price, so the total would be $1,800 plus any utilities/services not included in the co-op fee. Yes, for a 2BR at U and 14th this is a pretty good deal before we take quality into account. But you would not be saving $1,000-$1,500 per month on housing, given the age of the building and the likely condition of the common areas in a low-income building. Just putting it in perspective.

      • Anonymous

        Ah, thanks for clarifying – I didn’t really understand how the different components fit together each month. $1800/month for this is a good deal, but not a great deal, and given some of the other potential issues probably makes this whole unit not so appealing.

        • Anonymous

          As a reference point, $1,800/mo covers roughly $400k in mortgage. So you’re sinking $1,300 into coop fees versus potential equity. (The potential difference in equity isn’t quite as stark as the numbers above may seem, but it’s quite sizable.)

  • nrubenstein

    Co-op exposure, $1,285 co-op payment, looks like you need a significant down payment…. Bad deal. It looks cheap on the surface, but…

  • HaileUnlikely

    If you’re not familiar with co-ops, I’d urge you to read up before declaring it a good deal or not.

    Unfortunately, an astronomically important part of the whole deal is the co-op documents, and you don’t get to see those until you have already put in an offer, had it accepted, and are under contract. At that time, you have something like 7 days (might be more or less, verify this) during which you can legally withdraw your offer without penalty if you want.

    I almost bought a co-op a couple years ago, got an incomplete set of docs, tried to get the missing stuff, had trouble doing so, got an extension from the owner on the document review period, finally got the docs, realized the place (different co-op, not this one) was basically in a death spiral. A third of their residents were not paying their fees on time, the building getting behind on important maintenance, and the board was eating up its reserve funds (which are supposed to be for big capital projects like replacing the roof or the boiler) to simply pay the underlying mortgage and stave off foreclosure. I withdrew my offer and ran away as fast as I could.

    The saving grace in the almost-disastrous document-review process is that even if I failed to discern the whole death spiral thing that was going on, my lender noticed it and declined my application due to the high proportion of residents behind on their bills.

    If you get yourself into a place where many of the residents are not paying their co-op fees on time, things can go downhill fast. Note that the co-op does not own the actual property itself, it has a mortgage on it (that’s what that “underlying mortgage” thing is). This doesn’t happen often, but if too many people get behind on their co-op fees, the lender can foreclose on the whole co-op, which makes you the proud owner of precisely nothing.

    • baz

      wow. brutal. thanks for the info!

    • annonny

      Unless the law has changed in the last couple of years, a buyer gets 3 days to review co-op docs.

  • Anonymous

    For these housing programs, how is income measured? Net? Adjusted gross? Fed or DC adjusted? MAGI?
    I’ve checked out the DC government pages, but they just refer to “income” without specifying what they mean.


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