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The Pursuit: Investing in Anacostia

  • December 10, 2012

by Shilpi Paul

The Pursuit: Investing in Anacostia: Figure 1
Paula Wu, right, and her agent Megan Markey. Photo by Porter Watkins.

When Paula Wu was looking to invest her money, she knew that she wanted it to be some place safe. The recent California transplant felt that the stock market was unpredictable, but that DC’s real estate scene was growing, with many areas showing steady appreciation.

“Compared to a stock, real estate is transparent,” Wu told UrbanTurf. “I can choose where to buy a property, the tenants who will rent, how I manage it — I have control from start to finish.”

Wu, who moved to DC in 2011 and lives in Bethesda, started researching various neighborhoods across the area, looking into real estate appreciation data as well as crime statistics. Like many in the city, she saw much of the investment moving eastward across the Northwest quadrant of DC, but the neighborhood that caught her eye was across the river: Anacostia.

“It didn’t have the best reputation, but appeared to yield a good financial return,” Wu said of the area. The crime statistics were also comparable to many wealthier parts of the city, Wu told us, leading her to believe that perhaps the reputation was more stigma than reality.

The Pursuit: Investing in Anacostia: Figure 2
A kitchen in one of Wu’s apartments.

Still, she was interested in minimizing as much risk as possible. After more research, she learned that some landlords in Anacostia (like perhaps everywhere) had trouble with tenants paying on time. So, Wu decided that once she bought the property, she would limit her scope to tenants with Section 8 housing vouchers, government subsidies that help low-income families with the rent. That way, Wu said, she would get a direct check from the government every month.

Wu also knew she would be relying on a property manager to help her find tenants, maintain the building and communicate with the bureaucracy behind Section 8. This proved to be a hurdle: the first few property managers she spoke with wouldn’t work in Anacostia. After several frustrating leads, Wu finally found Karissa Leake who had previously worked in the Section 8 office and knew her way around the process.

With her plan in place, last winter, Wu found a four-unit apartment building in Anacostia being sold as-is. Wu made an offer of $328,000 and closed in July. While the property had been renovated with features like granite counters and stainless steel appliances, Wu spent a couple months fixing it up — installing washer/dryers units, sprucing up the lobby and repairing an old duct.

The Pursuit: Investing in Anacostia: Figure 3
A similar apartment building in Anacostia

Leake was able to find tenants who have been calling Wu’s new investment home since September. Wu’s total monthly income from the property? $5,200. By her calculation, she is earning a 19 percent capitalization rate. “If I had bought a condo for the same price somewhere in Logan Circle, I would maybe be looking at a 6 to 10 percent rate of return,” she determined.

Wu hopes to go to medical school in two years and to use the rental income to pay her tuition. Eventually, she’ll sell, but she’s in no hurry. “I fully expect prices to double in the next ten to fifteen years,” she said.

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This article originally published at http://dc.urbanturf.com/articles/blog/the_pursuit_investing_in_anacostia/6415

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