[vc_row][vc_column][vc_column_text]What do agents tell first-time buyers about the competitive DC real estate market when even move-up buyers with equity are being priced out? Are first-time buyers doomed to dark basement efficiencies in undesirable locations, or can they find a more attractive niche in the market?
Too Much Too Soon?
It’s a common perception that first-time buyers just expect too much for their limited budgets and should wait until they’re more established to buy. Although their wishlists can be daunting, we find most first-time buyers adjust quickly when presented with the realities of the market, and we can suggest viable options.
The Pros And Cons Of Condos
Condos and co-ops are usually the top choices for first-time buyers, who consider both resale and new construction units.
New condos have a lot of attractive attributes:
- Turnkey, no updating or remodeling required
- One year appliance warranties from date of install
- Finishes are often fairly high-end
- Condo fees start out low
- Once the location decision has been made, buyers have multiple floor plan options
But they also have some potential drawbacks:
- Priced at a premium
- Build quality
- Locations of affordable developments
- Dues will increase
- Longer breakeven cycle
New condos are priced higher because the materials are new and development costs are factored in. Weighed against the cost of updating or remodeling and considering the value of a new building as a whole, it may be wise for some buyers fo pay the 15% to 25% premium. That’s if the development is ground-up construction. We explain to buyers that the label “new construction” doesn’t necessarily mean the entire building is new. Condo conversions are more like rehabs than new construction, yet developers use the label in their marketing. Developers aren’t required to replace all components of a conversion building, so perceived savings relating to maintenance and updating–even increases in condo dues–may be exaggerated. And, since “new construction” will no longer be new in a couple of years and the breakeven timeline is extended, buyers of new condos must often retain their unit longer to realize profit on resale. It’s also important to investigate building quality. This can be difficult because post-construction inspections reveal very little. Our background in new construction proves valuable to our clients in this area, but there is always a risk to purchasing new construction.
When considering new construction, buyers may want to focus on certain types of products, keep location and builder reputation top of mind and opt for features and amenities that will appeal to other buyers on resale.
Resale condos are a good option if upgrades to key components such as roof, mechanicals and plumbing have already been made. It’s important to determine if they’re in need of updating or replacement since these are high-cost items that may result in special assessments to unit owners. Bonus points for in-unit washer/dryers and private outdoor spaces that buyers will find attractive on resale. Units in older buildings with low price per square foot may be undervalued because their fees are high, systems are in need of replacement, or other conditions exist that make financing difficult; high commercial to residential use ratio, for example. While no building is perfect and compromises must usually be made, we encourage buyers to think like their own future buyers. Purchase a property with features and fees that sell. Your first property probably won’t be the biggest investment during your lifetime, but it will be a springboard to your next property.
Looks Aren’t Everything
Does your resale condo have to be the image of a new model home? Of course not. You can certainly update most of its features incrementally. It’s beneficial to live in a home awhile–get the feel for what’s really needed–before deciding on permanent changes. Think about doing a few projects yourself. Putting a little sweat equity into your home will help you save money and get exactly the look you want. Be smart about the improvements you make and you’ll position yourself for a bigger payday when the time comes to sell.
The Question Of Co-Ops
An alternative for those who must have larger square footage is the cooperative. Co-ops often offer larger units at better prices, but we caution buyers to consider slower resale, lower equity build and more stringent rental restrictions as “cons.”
You can read about co-ops here.
For more on new condos in DC, check out our Development section.
Finding Value At A Starter Price Point
Where can good value be found at a starter price point? We favor up-and-coming neighborhoods with good growth potential and undervalued buildings in established neighborhoods. We work with buyers to determine their needs and identify general locations that will serve them well in terms of lifestyle and resale value, then map out potential properties. The process can sometimes be longer than the average home search, but the rewards are well worth the extended timeline.
If you’re a first-time home buyer, browse our Tools section. We’d love to help with your search, so give us a call if you’re ready to work with an agent![/vc_column_text][/vc_column][/vc_row]