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Profit Margins Shrink for Anacostia Investors As Prices Rise

by Shilpi Paul

Good Hope and Martin Luther King, Jr. Avenue SE
Good Hope and Martin Luther King, Jr. Avenue SE

A couple weeks ago, UrbanTurf featured a dilapidated home in Anacostia that was purchased for $54,000 a couple years ago and transformed with sweat and grit and about $100,000 towards renovations. Many commenters chimed in to compliment the property, some hoping to follow the same path.

Last summer, we reported that the average sale price was creeping up in the neighborhood east of the river as investors bought up shells, renovated them, and put them on the market for two or three times the purchase price. UrbanTurf decided to investigate to see if deals like that were still available.

It appears those hoping to turn a threefold profit on an investment property in Anacostia may have missed their opportunity.

“The days of buying a fixer-upper property in Anacostia for under $100,000 are gone,” Darrin Davis, the owner of Anacostia River Realty, told UrbanTurf.

While fixer-uppers are still available, the sale prices have risen as multiple investors now compete for neighborhood properties. Davis mentioned a property, which needs to be completely gutted and rebuilt on the inside, that is listed for $165,000. The sale of rehabbed homes tends to be in the mid $200s to $300s. Anacostia’s market of investors-seeking-shells is still more competitive than its market of owners-seeking-rehabbed properties, creating a slim profit margin.

Instead of selling right away, said Davis, he sees investors holding on to their properties and renting them out, with the hopes of selling them in a few years when property values rise further.

Last year, Irene Dubrovina bought two Anacostia rowhouses for $75,000 apiece, and sold them for almost three times the purchase price. Now, she concurred, deals are much hard to find. Dubrovina recently made an offer on a vacant lot in Anacostia for 15 percent above the list price, and was outbid.

“The market is strong, but I do think that it is getting saturated with investors,” Dubrovina told UrbanTurf. “A lot of investors are now buying with an expectation that the market is going to continue to go up at a fairly fast pace, and I don’t think that this is a prudent strategy — we’ve been here before.”

Having moved on from Anacostia, Dubrovina has started working on three projects in nearby neighborhoods like Hillcrest and Fort Dupont Park. Davis is encouraging his clients to consider doing the same.

“I am now urging investors to venture outside of Anacostia and into neighborhoods like Congress Heights, Randle Heights and areas like Deanwood and Marshall Heights,” said Davis.

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This article originally published at https://dc.urbanturf.com/articles/blog/profit_margins_shrink_for_anacostia_investors_as_prices_rise/6803

6 Comments

  1. Mary said at 5:59 pm on Wednesday March 20, 2013:
    Hmmm. I wonder what projects Dubrovina's working on in Hillcrest? That neighborhood's a favorite of mine, but inventory seems to be quite low.
  1. StringsAttached said at 7:12 pm on Wednesday March 20, 2013:
    So am I to understand that if you're not make triple returns on your investment, it's not worth it? I live in Randle Heights and I can't really say those type of deals are there for single family homes. You may be able to get that type of return over time on small condo/apartment buildings.
  1. Alison said at 7:49 pm on Wednesday March 20, 2013:
    Leave Hillcrest and Fort Dupont out of the gentrification. Southeast is the last area that is affordable and regular working people can live a relaxing, non-overly urban existence in the city. DC is out of control with a money hungry government and investors. NW is destroyed, commercialized and the culture is gone. Leave us be.
  1. Sydney searching for a home said at 8:10 pm on Wednesday March 20, 2013:
    I've been searching for a home that could be a fixer upper. Thank you for sharing this information. It is going to help my process in this search.
  1. I will believe it when I see it said at 10:39 pm on Wednesday March 20, 2013:
    No street addresses for Dubrovina's magic flip jobs. Can we at least get what block? 1500 block of V Street SE? Where? The other side of Good Hope Road? I really wonder the objectivity of this story and site. It's great to be bullish on the Anacostia market ... but let's be real. Are these new homeowners picking up all the trash in the streets or adding to it?
  1. JMartin said at 11:29 pm on Wednesday March 20, 2013:
    Fairlawn is a great area to invest in as well! There are a lot of row houses being renovated and it is just over the bridge from Capitol Hill. I've lived here for 5 years and couldn't pick a better neighborhood for the value. Well kept homes and lots of development on the way!

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