You're a first-time homebuyer in DC
Is finding a home you love in a neighborhood you love, with a short commute and good investment value impossible?
Nah.
What may seem like a daunting task can be achievable by following a few guidelines and breaking the process down into simple steps:
- Hire a real estate pro to guide you through the process
- Start with target chart with bull’s eye as ‘location.’ Work outward to ‘price,’ ‘neighborhood,’ ‘needs,’ & ‘wants’
- Create an automatic feed(s) of listings that match criteria, including off-market opportunities (Collections)
- Narrow choices down to a shortlist of homes to tour
Now follow the lists below to avoid mistakes and experience an orderly, successful search and transaction.
Define Your Search
Start off with a clear idea of what you’re looking for. Don’t rely simply on your list of ‘wants’ and ‘needs.’
Is your search realistic, and does it make sense for your circumstances and goals?
Ask your agent what the upsides and downshides are for resale and investment value, lifestyle (if you don’t know your DC neighborhoods well), etc. Find out what sells and what doesn’t, and why. If no one else wants the home you’re looking at, chances are buyers won’t want it when you’re the seller, either. Revise your list based on new information before starting your search. Washington DC ranks 39th on the Price To Rent Ratio scale. It’s cheaper to rent than buy in 45 of the 50 most populous U.S. cities. DC’s 2023 price to rent ratio is a borderline 20. In the District, renters dominate the market with a rent vs owned ratio of 57% to 43%. Here’s the rent-buy rule according to Motley Fool:
- Price-to-rent ratio of less than 15: It’s cheaper and more affordable to buy versus rent.
- Price-to-rent ratio of 16-20: Leans towards renting as a better option over buying.
- Price-to-rent ratio of over 21: By renting you are making a much better personal finance choice.
So why lean towards “buy” in Washington DC? The Rent-Buy Equation doesn’t take into account:
- Investment value
- Quality of life
- Rent increases
- Cost of repeated moving
- Reduced mortgage cost when rates drop
Mistakes To Avoid
- Don’t buy a low-priced money pit
- Don’t purchase where rentals aren’t allowed
- Don’t shop over your budget expecting a price reduction
- Strive for turnkey unless you have a rehab fund
- Question the reasons for high Days On Market
- Check the building’s warrantability and financials carefully
- Don’t sacrifice location for cosmetics
- Don’t dismiss smaller units in top neighborhoods
- Don’t drag your search out waiting for perfection
- Avoid poorly maintained and managed buildings
- Don’t forego checking crime maps
- Avoid multiple offer situations if possible
More Tips
- There are many more tips and guidelines to share. Give us a call and let’s discuss your first home purchase!
Best Practices
- Work with an expert
- Compare loan programs and rates
- Look for first time buyer programs you may qualify for
- Have your pre-approval ready
- Get a worksheet outlining transaction costs
- Create a prioritized list of needs vs wants
- Shop as a future seller
- Understand costs after homeownership
- Understand the contract and contingencies
- Understand condo and co-op rules and restrictions
- Move quickly when the right home is identified
- Get a home inspection
Our Favorites
- 750-950 Sft single family houses in high-value neighborhoods
- 300-650 Sft condos in rentable buildings in high-value neighborhoods
- Co-ops with flexible rental policies
- Condos and co-ops within 1 mi. of a Metro station
- One bedroom + den condos and co-ops
- Two bedroom condos within 1/2 mi. of universities
- Condos and co-ops with parking
- Condos and co-ops on top floors
- Condos and co-ops with private outdoor space
If This, Then That
- If condo or co-op; Rules that allow for rentals later
- If condo or co-op; Look for in-unit W/D, private outdoor space and proximity to Metro
- If condo or co-op; Secure package room, bike room and storage units are a plus
- If a small condo; Location is key, W/D is a plus, storage, fixtures/finishes matter
- If co-op; Check for underlying mortgage and its interest rate
- If single family home; Inquire about roof repairs/replacement and type
- If single family home; get a full general inspection and separate roof inspection
- If single family home; get a pest inspection even if not required by lender
- If the property is a flip; Check Scout DC for permits, inspections and request specs, receipts, warranties