DC Buyer: Small Business Owner Looking for Live/Work Space

• March 17th 2010

by Martin Smith

DC Buyer is a series on UrbanTurf where we look at buyers from various demographics and provide available housing options for them in the current DC market. If you are a prospective buyer and would like to be featured in DC Buyer, send an email to editor2010@urbanturf.com. See all of our past DC Buyer articles here.

Today we’re working with Alex, a small business owner looking for a live/work space on or near Capitol Hill. He has a good credit score of 722, an older car that is fully paid off, and carries minimal personal debt, leaving his debt payments at less than $200 per month. His income is typically around $80,000 each year. While he has several large loans for his business, they are all in the name of his company and are paid out of the revenue it produces.

Alex currently lives on the Hill and enjoys it very much. He founded his company five years ago, and it has since become very successful. About three years ago the company outgrew the ability to be run from his home, so Alex has rented office space ever since. He now has two additional full-time employees and would like to find a property where he can have a small office component that is separate from the residence. In addition, he would like to have enough space for a meeting room to accommodate the occasional client visit, since he will no longer have the shared conference room his current rental space provides.

On the residential side Alex doesn’t need very much, but he would welcome more space than he has now in his 550 square-foot home. He knows he will likely end up with another small kitchen, so he anticipates having to renovate it himself to maximize use of the space. Lastly, he would really like to have an outdoor area so that on nice days he can move the office outdoors where he, his employees and his dog can enjoy the sun.

Alex currently owns a condominium near Union Station, which has about $230,000 in positive equity that he will roll over into his new home. In addition, he has managed to save about $60,000 that he can either apply toward renovation costs for the residential component of the home or as an additional down payment. Finally, his business has set aside $25,000 in this year’s budget for office renovations for the work space in the property. He is going to be shopping in the $400,000 to $450,000 range.

The first choice for Alex is 258 14th Street NE, which is new to the market and listed at $435,777. This corner building had a retail tenant in the past, but currently has a large unused store room on the first floor with a half-bath and a three-bedroom, two-bath apartment upstairs.

Out of all three options, this one is in the best condition and really only requires cosmetic changes to become functional, although Alex would likely undertake some more intensive projects immediately to make the space exactly how he wants it. An added bonus is that the two spaces are already separately metered for utilities, which makes keeping personal expenses and business expenses separate much easier from an accounting perspective, and is one more cost he would not have to take on. Lastly, there is an outdoor space with this property that would easily exceed Alex's needs.

The second property we found for Alex is 58 Florida Avenue NW. Listed at $429,000, this three-level row house has been fully renovated into office suites and includes a full kitchen and off-street parking. While it is not on the Hill, it is still close enough that Alex can get there to meet with clients quickly and easily.

The primary downside is that there is not currently a residential component to the building, so he would need every penny of his construction budget for that build-out, and there are additional zoning and permitting issues that need to be addressed before he could move forward. The location, however, is very close to the developing NoMa business district where several of his clients and the New York Avenue Metro station are located.

The final option for Alex is an unexpected find for his price point. 1242 Pennsylvania Avenue SE is a two-floor Victorian that was built in 1900 and is currently on the market for $425,000.

This property was once residential, then was converted to commercial, and is now just a construction mess. It has been mostly stripped to the studs, but the advantage of this is that it is easier to estimate construction costs when all utilities and framing are already exposed. Plus, the build-out can be completed to Alex’s exact specifications and preferences. The construction costs on this property will be more than he had originally budgeted, but a Pennsylvania Avenue address only two blocks from a Metro station (Potomac Avenue on the Blue and Orange Lines) is certainly tempting. He feels that this property is also the most likely of the three to have an appreciable increase in value after he has finished it.

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

See past DC Buyer articles from UrbanTurf:

• DC Buyer: Attorney Power Couple Looking For More Space
• DC Buyer: Office Manager and Part-Time Grad Student Looking for First Home
• DC Buyer: Manhattan Couple Looking for Outdoor Space (If Possible) in Logan Circle
• DC Buyer: 27 Year-Old Looking For A Place Where His Clothes Will Be Clean
• DC Buyer: Two Hill Staffers Looking for a One-Bedroom Unit

This article originally published at https://dc.urbanturf.com/articles/blog/dc_buyer_small_business_owner_looking_for_live_work_space/1885.