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The Cost of Buying: Comparing Condo Purchases in DC vs. Arlington

by Shilpi Paul

Recently, UrbanTurf reader Navid Choudhury came to us with an intriguing request: help him determine the cost-of-living difference between buying a condo in DC versus Virginia. Choudhury was concerned that the significant difference in income tax (DC’s rate is 2.75% higher than Virginia) would make a big difference in his monthly budget. He was also weighing a few other variables, like the cost of food, owning a car, and property taxes.

So, we narrowed down the circumstances and went about crunching the numbers.

For our calculations, we compared two married couples living in two-bedroom condos, one in Clarendon and one in DC. We assumed that both offered a 20 percent down payment, and that the DC residents will live in walking or bicycling distance of work. Our income tax rates came from here, our property tax information for Virginia from here, and for DC from here. We also took into account the Homestead Exemption for DC residents, which lowers the assessed value of the home by $67,500 for tax purposes.

Here is what we found:

The Cost of Buying: Comparing Condo Purchases in DC vs. Arlington: Figure 1

All told, it looks like a difference of about $10 a month. However, if we were to factor in bus and Metro transportation in DC, that would add $70-$80 in commuting costs, making DC more expensive. (We also didn’t consider that state income tax may be deducted from federal tax returns.) There are a couple other factors that would impact the final number, like differing insurance rates and the higher restaurant tax in DC. But for these hypothetical couples, the budget almost balances out.

This article originally published at https://dc.urbanturf.com/articles/blog/the_cost_of_buying_comparing_life_with_a_condo_in_dc_vs._clarendon/5218

17 Comments

  1. bone said at 3:57 pm on Thursday March 1, 2012:
    Your income tax calculations are wrong. Income is taxed on a progressive scale, so for example in DC an individual pays 4% on the first $10,000 of income, 6% on the next $30k, and 8.5% on income above that amount. (Income over $350k is taxed at 8.95%). Those are for an individual. I don't know if the brackets change for married couples filing jointly. http://cfo.dc.gov/cfo/cwp/view,a,1324,q,610984.asp Virginia also has a progressive income tax but the brackets are different: http://www.tax.virginia.gov/site.cfm?alias=TaxCalculator The net effect is DC and VA income taxes are closer than the numbers you gave. Also keep in mind state income tax is deductible on federal tax returns, which brings the difference even closer.
  1. Mark Wellborn said at 4:09 pm on Thursday March 1, 2012:
    bone, Thanks very much for pointing that out. We have made the changes to the calculations, the chart and our conclusions. Mark Wellborn
  1. jeanne said at 6:26 pm on Thursday March 1, 2012:
    This is very helpful. Could you do it for fha?
  1. mona said at 9:42 pm on Thursday March 1, 2012:
    Don't you have to also consider resale value and added equity in the years to come. If their condo is in Dupont,Logan Circle, Georgetown and several other places in the city then great deal with great equity down the road. Claredon may not be able to get the same value down the road that a resale in Dupont Circle. The 3 tenants of real estate, location, location, location
  1. Dana Hollish Hill said at 9:47 pm on Thursday March 1, 2012:
    This is a great calculation. It may be interesting to point out that there is a difference in closing costs for buyers. We etimate about 2.5% in Virginia and about 3.5% in DC. This will only impact year one, but could also impact the buyer again if they refinance at any point during the time they own the home. It would be nice to see Maryland added to the mix as well. Maybe next time?
  1. Todd said at 9:56 pm on Thursday March 1, 2012:
    This is such a hard thing to compare in a basic chart, since there are so many variables, some of which are not quantifiable. Price/sq ft differences, the benefits of walking to work (worth something), and so on. However, one certainly could use this information to put together a spreadsheet to compare real numbers. It's a good start.
  1. Shilpi Paul said at 9:57 pm on Thursday March 1, 2012:
    Hi jeanne and Dana -- Yes, if we do this again, we will look at FHA and Maryland. Thanks for the comment! Hi mona -- For these calculations, we took into account numbers that we could calculate now and that impact monthly budgets. Resale value and equity are harder to predict, but definitely have an impact on the bottom line. Shilpi Paul
  1. Izz said at 10:29 pm on Thursday March 1, 2012:
    Doesn't DC have the first time home buyer tax credit as well? Worth 6k I think?
  1. bone said at 10:54 pm on Thursday March 1, 2012:
    The theoretical couple making $150k/year makes too much to qualify for the first time home buyer credit. I don't think the $5k credit has been renewed for 2012 yet. Going by the 2011 numbers the credit phased out at $70-90k single, $110-130k married.
  1. Nikki S. said at 12:51 am on Friday March 2, 2012:
    Does this report take into consideration Transfer/Recordation taxes? Closing costs are usually higher for DC, but long-term the tax benefits are greater because of the DC Homestead Deduction and lower property tax rates in the District. We wrote a pretty lengthy piece on this subject last spring. http://www.federaltitle.com/blog/transfer-taxes-real-property-taxes-explained
  1. Kevin said at 1:13 am on Friday March 2, 2012:
    $57 for car property tax on $15k of assessed value. I think you shifted the decimal point to the left one spot to many. I paid a little under $500 and my car was assessed between $16k and $15k. The tax rate is around 4.75% with around $575 off for personal property tax relief.
  1. Kevin said at 1:19 am on Friday March 2, 2012:
    As a recent reject from the condo buying market (2-young professionals with no debt and excellent credit can't get a 1br w/ den in this city), I would like to know the 540k condo that has a $200 condo fee. The number doesn't matter in the comparison because it is the same for both but I couldn't help but laugh when I read that number.
  1. Lou Muscarella said at 1:57 am on Friday March 2, 2012:
    This is a great chart, but differences are minimal! I am often asked this question and after you boil down the numbers, it really comes to lifestyle and personal preference! Love Clarendon as I live a few blocks away, but DC is more vibrant with a lot more options than VA. Throw in one late night cab ride from DC and the differential tips the other way. Death and taxes are certain no matter where you live, it really comes down to how they get packaged and how you decide to pay them? I would also love to see a chart with Maryland added!
  1. Lowet said at 4:29 am on Friday March 2, 2012:
    @Kevin, I live in Logan Circle and have a $200/month condo fee on a $550,000 condo. Look for a row house conversion.
  1. Richko said at 5:00 am on Friday March 2, 2012:
    >The 3 tenants of real estate, location, location, location That’s a good pun, but it’s “tenets.”
  1. Andre said at 7:26 pm on Friday March 2, 2012:
    Cool analysis. Could you do something similar that compares the cost of renting vs. owning in DC?
  1. JP said at 8:23 pm on Friday March 2, 2012:
    To build on Andre's comment, you should compare the cost of renting in the hypothetical condo in Clarendon versus Logan/Dupont. Having been a renter in both neighborhoods, I'm pretty confident that renting is about 10-20% more in the DC neighborhoods versus Clarendon. Given that the market values are identical, the DC condo is clearly a better investment. I've built several similar models, and my financee and I are pretty much the hypothetical couple that work downtown. Our conclusion is that if you work in DC, live in DC, and if you work in VA live in Clarendon. Cutting your commute down is the easiest way to improve your quality of life. The other variable that has to be considered is growth. As a newly married couple, do you plan on having a family 5-10 years down road? If not, will you outgrow your 1000 sq ft condo?

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