DC Buyer: PR Professional Looking for Home With Rental Income

by Martin Smith

In the DC Buyer feature, UrbanTurf looks at homebuyers from various demographics and provides available housing options for them in the current DC market. After presenting some choices, we ask our readers to help them make their choice.

This week, we’re working with Nick, a 27 year-old public relations professional who would like to purchase his first home with some down payment assistance from his parents. He earns $75,000 a year as a base salary, with some additional income from bonuses. Nick is already in possession of a generous gift from his parents of $150,000, and on top of that amount, Nick has saved $50,000 bringing his total for down payment and closing costs to $200,000. He has already been approved for a $460,000 mortgage, qualifiying him for a home around $660,000.

1761 Harvard Street NW

Nick’s plan is to find a three-bedroom house or bigger, and use the rental income from the extra bedrooms to help him cover the monthly costs of the mortgage payment. He was in private negotiations with his landlord to purchase the five-bedroom house he currently rents in Shaw, but after a home inspection process that revealed the extensive work that it looks like the house will need in the near future, Nick is having second thoughts. While Nick likes Shaw, he’s open to other neighborhoods. His only real requirement is that the property have room for his dog, preferably in a fenced, outdoor yard.

The first place we’ve found for Nick is 1761 Harvard Street NW. Priced at $619,000, this three-bedroom, three-bath townhouse is conveniently located in Mount Pleasant, which provides easy access to Columbia Heights and Adams Morgan. This end-unit home has beautiful views, a spacious rear deck, and a new kitchen with stainless steel appliances and granite countertops. The downside to this property is that the third bedroom is classified as a den in one part of the listing, so it may be small, which would reduce the amount of rental income Nick could collect.

1322 Emerson Street NW

The second choice is 1428 Taylor Street NW. This three-bedroom home is on the market for $499,000, and provides an excellent value for the location just north of Columbia Heights. While it is a little dated on the interior, most of the updates to modernize the home (such as removing the mirrored wall in the living room) are easy and relatively inexpensive.The property features a fully serviceable kitchen as is, and Nick could undertake the remodel as a way to boost his equity in the home and produce something that is customized to his preferences. Nick’s dog is also sure to appreciate the massive backyard as well.

The final choice is in 16th Street Heights at 1322 Emerson Street NW. This renovated four-bedroom that also includes a large finished attic, is probably the best of the three properties when it comes to rental potential. In addition to a large main level and amply-sized bedrooms, the property has a pretty big kitchen that leads out to a deck and a fairly deep backyard that would provide some good run-aound room for Nick’s dog.

Given these three choices, where should he put in his offer?

See other articles related to: mount pleasant, dc buyer, columbia heights, 16th street heights

This article originally published at http://dc.urbanturf.com/articles/blog/dc_buyer_pr_professional_looking_for_home_with_rental_income/1910


  1. CTK said at 4:48 pm on Wednesday March 24, 2010:

    I saw the Harvard street house this weekend - lots to like, but the 3rd BR/den would need some work to turn it into a real bedroom.  It’s not the size, it’s the layout.  It’s currently an oversized entry foyer with a couch along the wall, and a laundry room & bathroom in the back.

    Loved the yard & screened back porch, though, as well as the location.

  1. Jon said at 4:50 pm on Wednesday March 24, 2010:

    The 16th Street Heights house would be my choice. A friend lives in a similarly sized group house in that area with each tenant paying about $800 a month, so the potential is definitely there for rental income.

  1. AmyK said at 7:10 pm on Wednesday March 24, 2010:

    The 16th Street Hts home looks like the best for the $$$ but the Irving St. house has the best location. Tough choice.

  1. SL said at 10:38 pm on Wednesday March 24, 2010:

    If rental income is what’s wanted, go for the Harvard St. house…it’s in an area that’s much more in demand than the other two houses. But this story raises a lot of red flags for me.

    I did the same thing when I bought my first house - rented out rooms - in order to pay the mortgage. All-in-all it was OK, but owning your own group house you live in can be a bit of a strange dynamic and it’s not problem-free.

    I wonder why he wouldn’t just buy a place for $400K-$450K and live on his own, or have just one housemate? A $460K mortgage seems steep for someone making $75K per year even with the rental income. I think he should buy a place he could afford on his own, and if he chooses to have housemates he could live cheaply and have extra income to enjoy. 

    I would recommend the area north and east of the Columbia Heights metro and Petworth as areas that would both be a good investment and areas where you could find a house in good condition in the $400k to $500k range.

    Or, there are lots of options for 2BR condos in this price range - in more fun/happening areas like Adams Morgan, Columbia Heights, and Mt. Pleasant.

  1. anon said at 10:30 am on Thursday March 25, 2010:

    Would be nice to feature average DC Buyers… certainly these trust fund kids can’t be the norm

  1. Lauren said at 10:49 am on Thursday March 25, 2010:

    I think I agree with SL - why not buy a house for $400-$450k, which he could afford without the rental income?

    I think having roommates is a great way to save money, but it should be a choice you make to have extra cash. If after a year or 2 he decides he’s sick of the roommates and wants to live alone he could feel stuck if he needs them to afford the mortgage.

  1. former Georgetowner said at 11:33 am on Thursday March 25, 2010:

    A $450K mortgage on a $75K income is definitely steep.  I don’t know how he’s gonna cut it. 

    I have a $375K mortgage on a $100K income.  I have a 2 bedroom, and I charge my best friend/roommate around $800.  Although I set aside 15% for retirement and shop at wholefoods way too much, I feel like I’m living paycheck to paycheck.

  1. anon said at 11:43 am on Thursday March 25, 2010:


      That’s where mommy and daddy come in…

  1. cbmendez said at 11:48 am on Thursday March 25, 2010:

    Of the choices offered - Taylor St. Renters may like easy access to bike lane, bus and metro and easy access to good rec center pools and gyms. Dog will like good sized front and back yards. He will like not being house poor - renters or not. The updating isn’t difficult and there is money left to do the work.

    Otherwise - Consider a multi-unit or separate apartment property. I like 1329 Quincy NW, 20011 or 632 Florida NW, 20001,

  1. Nick said at 12:01 pm on Thursday March 25, 2010:

    Anon(s) - Thanks for the snark!

    I’m not a trust fund baby and have worked hard to get where I am. Mommy and Daddy saved a lot, have owned their own houses (divorced) for a while and, seeing the market opportunity now, want to help me. Don’t blame me/them for having made the right financial decision sover the years and no having the cash to help out their kids.

    My final point would be that this feature is inherently going to be self-selective to the folks in situations like me in a city like DC - folks with the resources and ability to make the move in the market. If you can’t afford the down payment in this expensive-assed city folks shouldn’t be buying houses. They should be renting as they probably have for a while now.

    Martin and the Urban Turf crew - thank you so much for this and all of your posts. I love this blog!


  1. former Georgetowner said at 12:39 pm on Thursday March 25, 2010:

    another thing to consider… you’re probably a single guy now and you’re living a fratty lifestyle. 

    Think about your needs in the future.  What if you meet a girl and fall in love and decide to have a baby within the next 3 years?  What’s the possibility of the two of you affording this huge house on a single income?  or even both incomes?  If the two of you can’t afford it on your income, is she gonna be amenable to 2 roommates living with you? 

    Just sayin’... things change.  when I first started looking for a place, I was originally looking at only 1 bedrooms.  But then I thought about it, and decided that a 2 bedroom would be more long term than 1 bedroom.

  1. SWed said at 1:39 pm on Thursday March 25, 2010:

    “I’m not a trust fund baby”

    Keep dreaming. Non-trust fund babies don’t get gifts of $150k.

  1. Peter said at 3:52 pm on Thursday March 25, 2010:

    “Keep dreaming. Non-trust fund babies don’t get gifts of $150k. “

    This is not true.  There are plenty of families that have enough to help their children out with a downpayment but do not have trusts or large amounts of money set aside for them.

  1. cbmendez said at 4:04 pm on Thursday March 25, 2010:

    I tried so hard, not to go all Financial Guru on everyone. Not one mention of Dave Ramsey, Michelle Singletary or Suze Orman in my previous post. This blog seems to bring it out in me. I do not post nearly as often as I would like, because I know my soapbox is not the point of this forum. However, the Snark & Jealousy cocktail some folks are sipping is bitter indeed.

    Yes, my friends, you, your parents, and even your children can create a future full of good financial decisions combined with hard work and gifts of $150,000 (and not even flinch at the taxes…whew). It is not impossible, it is not difficult, but it will never be quick. Find a simple plan, commit to it, and watch what happens. Its not too late, you are not too old and your kids are not too young.

    Nick - cannot wait to hear your decision. I wanted to do exactly what you are trying to do (income property). I should have done what Georgetowner did (2bd/2ba) instead; all I could afford in 2006 was a 1bd/1ba. I love my place, but now married and wanting to foster/adopt a few kids, my 513 sq/ft mansion in the hills is just a tad small.

    One more thing - become intimately familiar with DC’s landlord tenant laws. Maybe even hire a professional management company or a real estate attorney. This town can be very hard on a property owner and very lenient on tenants.

  1. anon said at 11:32 am on Friday March 26, 2010:

    “However, the Snark & Jealousy cocktail some folks are sipping is bitter indeed.”

    whatever dude. my folks have worked hard enough to be able to give me $150K. Doesn’t mean they would ever do it and I would never ask it of them either. let’s see some features on buyers who live in the real world.

  1. gk said at 11:44 am on Friday March 26, 2010:

    can somebody explain to me how these “dc buyer” posts work?  are you actually debating between these three properties, having already gone to see them?  are you actually trying to get people’s advice?  or is this just to foster a theoretical blog discussion?  i ask primarily b/c the harvard street house is already under contract (although, having gone to the open house last weekend, i wouldn’t have recommended it).  if you’re really looking and you see something you like…you need to just go for it!  the market is crazy right now for anything remotely decent!

  1. ReturnDrill said at 11:53 am on Friday March 26, 2010:

    Like others, I feel the options presented don’t make the best financial sense. Nick should really opt for a home with an income suite.

    Basement apartment would bring in $1000 - $1500. His mortgage would be less than $460,000—roughly $3000/month PITI @ 5.25%. Add one roommate for $800, and he’s paying between $700 - $1200 a month. Add a second roommate, he’s potentially living for free.

    Alternatively, he could rent the top for at least $2500, and live in the bottom ‘til he has kids. Once he has kids, rents will have risen relative to his fixed mortgage, and it’s likely in a couple years that he’s getting a minimum of $1200/month rent—if not $1750.

    He can afford a to do this in LeDroit, Bloomingdale, H Street, East Col Heights—lots of options. And here’s the most beautiful thing: his mortgage payment goes down over time.

    The next question, of course, is how does Nick afford private school for his kids.

  1. Mark Wellborn said at 12:05 pm on Friday March 26, 2010:

    DC Buyer is a series on UrbanTurf where prospective buyers provide UrbanTurf with financials, etc. and we in turn try and provide them with three appropriate properties that fit their profile.

    In answer to the questions above, we hope that these posts both give the buyer a sense of what he/she can get for his/her money here in the city and also provide a chance for readers to weigh in on which properties we feature that they like best. We are well aware of the fact that attractive properties are being snatched up fast in today’s market, but we try and feature homes that have recently hit the market giving the buyer at least an opportunity to take a look.

    As for featuring “regular” buyers, well, we aim to do that as well. We do our best to attract a good cross-section, featuring those buyers who get gifts from their parents, buyers that have equity in a current home that helps them buy a larger home and “regular” buyers that have saved for their down payment for years.

    Mark Wellborn
    Editor, UrbanTurf

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