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“Why is this so cheap?”

by Prince Of Petworth — November 4, 2016 at 1:45 pm 15 Comments

1440-w-street-northwest

“I know nothing about real estate, so I thought I’d see if anyone has any thoughts on why this apartment by U street is so cheap and has been listed for 41 days?”

TWO BEDROOMS in a most sought after area of D.C. close to metro, restaurants, shopping etc. Income restrictions apply. Coop fee includes maintenance, insurance, taxes, underlying mortgage and some utilities.

The 2 bed/1 bath is listed at $180,320. The operative words in the listing are “Income restrictions apply”.

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  • Ben

    The HOA fee is $1,223/month – which includes an underlying mortgage and your real estate taxes – so that’s one reason its pretty low.

    • This is a also a limited equity co-op, meaning there are income restrictions for the building.

  • Anon

    Haha, well-played, PoP!
    .
    (See earlier post re: Shootings at 15/W for more details.)

    • FridayGirl

      +1

  • Lauren

    It’s a Co-Op.

  • bruno

    You’ve featured this building before, and this problem…. It’s the underlying mortgage, etc.

  • Zach

    I looked at a unit here before looking into more options-I am glad I stayed away.

    It’s essentially low income housing for purchase in an all-low income building. If you’re indeed eligible for a place like this, I would recommend joining the inclusionary zoning lottery, where you can be eligible to purchase a subsidized IZU condo in a new, multi-income building. Affordable Dwelling Units, which are similar, occasionally come up on RedFin too. It’s hard finding affordable options but there are far better ones available than this.

    • DC

      ++++ Zach’s advice.

  • textdoc

    I could’ve sworn I’d seen this building on PoPville before. Eventually I managed to find these threads — I’m not sure from my quick skim whether they discuss the income-restriction factor, but they do discuss the coop factor.
    .
    https://www.popville.com/2014/08/good-deal-or-not-unbelievable-opportunity-to-purchase-a-wonderful-sunny-one-bedroom-apartment-in-the-great-14th-u-street-corridor-edition/
    https://www.popville.com/2013/06/gdon-revisited-by-hipchickindc-1444-w-st-nw-108/
    https://www.popville.com/2013/05/good-deal-or-not-only-95000-to-purchase-edition/

    • bruno

      Yes. Yes. Capital! See? As I said. It’s reinventing the wheel, babe.

      • textdoc

        Now the past intel and current intel is all gathered in one location, though. 😉

  • DC

    Redfin assumes that the monthly on this place (incl. mortgage, HOA, taxes, homeowners’ insurance, and mortgage insurance) is $2,363/mo. Using the same rate (3.875% for 30 years AND 5% down) yields a supportable mortgage of almost $500,000 without such a high HOA, compared to $180,000 here.

    The problem, as many folks have noted is that the underlying mortgage/HOA is 52% of your monthly payment. If you could hypothetically eliminate that payment (buildings almost always have a fee so this may be exaggerated in this example), your purchasing power increases dramatically. Even if your HOA was $350/mo, then you could support a mortgage of approx. $425,000

    • Tsar of Truxton

      You are forgetting the cost of PMI that would be added to your monthly if you only put 5% down.

  • HaileUnlikely

    With fees this high, I wouldn’t be surprised if a substantial number of owners are or will one day become delinquent in their monthly fees. If enough of them are presently delinquent on their fees, the buyer may not be able to get financing, in which case the buyer pool is limited to buyers who meet the income restriction but also don’t need financing (there aren’t too many of those). In addition, once you get it, there is a substantial risk that if your neighbors don’t pay their fees, the HOA may need to levy special assessments and/or raise the fees further, at which point the place basically goes into a death spiral. That is why it’s so cheap.

    • Margaret

      It’s possible that this building is subsidized by HUD, which provides some protection against delinquent payers. However, an owner can never really make any money off of their unit.

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