Neighborhood Expert: Top 10 tips for investing in real estate in Northern Virginia

Laura Schwartz is a licensed Realtor in VA, D.C. and MD with McEnearney Associates in Vienna. You can follow Laura on Instagram at @LauraSchwartzRealtor or her Facebook page. Laura can be reached at 703-283-6120 or [email protected].

My goal is to make this an educational post for those interested in investing in real estate — some basic facts to help you evaluate if this might be right for you. If you have specific questions or want to bounce an idea off of me, please feel free to reach out any time.

Investing in real estate is one of the best ways to build your long-term wealth. I’m not talking about buying and flipping homes — as easy as Instagram DIYers make it look. I’m talking about buying individual properties, renting them out and holding them in your investment portfolio. There are many models that work — long-term leases or Airbnb — so you’ll have to look through what each requires to see what fits for you.

Here are some pointers:

  1. In general, townhomes appreciate faster than condos, and single-family homes appreciate faster than townhomes.
  2. Condos are by far the easiest investment to manage because there are fewer things to maintain.
  3. Anything with an HOA may have restrictions on the length of a lease (for instance, they may not allow Airbnb rentals), so carefully read any HOA resale package for rules and regulations.
  4. If you’re financing your investment, lenders require at least 25% down. Of course, you can do a HELOC instead and pay cash for something, but a traditional mortgage will require 25% down.
  5. I personally believe a property should be at least break-even for it to be worth it. Some others have different advice — your CPA might give you different advice — but for me, if it’s not going to make me money, I’m not buying it. And I’m talking out-of-pocket expenses vs. incoming rent. I’m not accounting for later deductions on taxes and end-of-year net. I want to know each month when I’m paying the mortgage and any HOA fee, the rent is covering it — and hopefully leaving me with extra income.
  6. Consider liability protection whether in the form of an LLC or an umbrella insurance policy. Talk to your insurance agent to see what they think is best for your personal situation.
  7. You’ll need a business license to rent out a property. This is a minimal cost (less than $100), but it’s an annual expense and requirement nonetheless.
  8. Should you hire a property manager? This is a VERY personal question. Management companies on average take 8-10% of the monthly rent as payment for their fee. That obviously cuts into your profit; however, in exchange, they handle all tenant requests and repairs. If you’re local, maybe you want to try a year before you hire someone to maintain the property. I will share that I don’t use a property manager for my rental property. However, it’s local, and if anything breaks, I just call a trade person to go fix whatever the issue is. Feel free to download my trusted resources vendor guide.
  9. There are many ways to find a potential tenant, including free websites you can use to advertise the property. Or you can hire a realtor to list it. Contact me for specifics on the cost of that. If you hire a realtor, they will also write the lease and do the background check for your approval.
  10. Be very diligent in tracking expenses for your taxes. I have a great Excel file I use for my CPA. It tracks my expenses for the year — condo dues, interest, taxes, business license fee, repairs, maintenance costs, etc. That way, at the end of the year, he can see what to use for deductions or depreciation, and we can see just how profitable the property is. It just helps to guide future decisions on whether to increase rent, not increase rent or potentially when to sell.

Again, feel free to ask me questions any time. Or, if you’re ready to get your feet wet, let me know!

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