From Homeowner to Real Estate Investor: What You Need to Know

A good financial planner will advise you that you want to have diversity in your investment portfolio, with the mix depending on your risk profile, stage of life and short- and long-term goals. Homeownership is a great way to build wealth, as your housing costs are helping you gain equity (instead of paying someone else’s mortgage and expenses) and realize other advantages (from tax savings to simply enjoying making a home your own).

Photo Credit: PT Money

Many individuals and families will own a primary or secondary residence, perhaps a vacation home, but others will jump back into the market with the goal of acquiring a property purely as an investment. Some will join a REIT (real estate investment trust), while others will buy and hold (waiting to sell when the time is right) or flip (making improvements and selling right after). However, many investors will buy and become landlords, having someone else pay most or all of their mortgage (and, ultimately, securing equity over time).

In the DC area, we have a very fluid population, with people constantly coming to and leaving the area for work and study — meaning there’s a strong demand for rentals. And, while DC’s rate of population growth rate has slowed down a bit, the region continues to be a draw for individuals and businesses. So, what should you ask yourself if you and your financial advisor agree a new real estate investment may be right for you?

• What’s my budget? Adding a property to your personal portfolio will require an initial investment and ongoing maintenance and carrying costs. You’ll want to consider the upper limit on your investment and then calculate the associated expenses — down payment (with higher requirements from lenders for investment properties), closing costs, professional fees (for the purchase, finding tenants and perhaps property management), maintenance reserves, etc.

• Where’s the “sweet spot” in the market? An investment property may or may not be a property you could see yourself in. As an agent, I advise my clients on the state of the rental market and what types of properties (size, location, price point, etc.) are the most likely to be consistently in demand and rented with limited gaps in tenancy. Just because it doesn’t meet your needs, tastes and location preferences doesn’t mean it isn’t a good investment.

• What’s my required capitalization rate and/or cash flow? Investors often evaluate potential properties by looking at their capitalization rate, or cap rate. Simply put, the cap rate is your annual return, calculated by dividing the net income by the market value of the property. In more competitive markets, like DC, lower rates might be expected. Another key consideration is your projected cash flow. Ideally, your rental income should cover the mortgage principal, interest, taxes and insurance on the property at minimum. If you are looking at investments that may have a slightly negative cash flow, take the time to even further evaluate if this is the best investment for you now. Perhaps you’d be better served by putting your funds into another short-term investment so you can increase your down payment and lower your PITI or by finding another property.

• What type of landlord will I be? If you are buying an investment property near your home (or where you have a network already established), you may be able to self-manage your property. While this will require you to invest time and be on call 24-7, you will be reducing your ongoing expenses. However, carefully consider the trade-offs in time and stress if your budget allows you to outsource the property management (with fees running up to 10% of the rental income). Either way, if you haven’t already, familiarize yourself with landlord-tenant laws in your area. You’ll want to ensure, whether you are hiring a property manager or self-managing, that you are a well-respected landlord , abiding by rules and regulations and understanding the processes for handling any potential issues.

If you’ve asked yourself these questions and think acquiring an investment property may be right for you, reach out to an experienced agent to dig in deeper and talk about next steps in evaluating your readiness!

Fall Market Update: What's In Store for Sellers & Buyers?

Source: Pxhere

If you’ve worked with a real estate agent to buy or sell a home, you know we are the first to let you know that we are many things but there are some things we are not — lawyers, accountants, tax advisors, inspectors, etc. You also can add psychic to that, meaning we cannot predict what your home will sell for in three years or what interest rates will rise to. That being said, we are in the field every day and are in a better position than most to spot signs of change in the market that could impact your strategy or decision making.

To that end, I wanted to share some statistics that provide food for thought and observations from my experiences and conversations with fellow Realtors® as we head into the fall market. Knowing when is the right time to buy or sell, while it certainly can be impacted by market dynamics, is really mostly about your personal situation. Have you outgrown your current home or are you moving out of the region? Do you have a new job and need a shorter commute? Is what you spend on rent more than what you would spend to buy a comparable or larger home? And those are just a few.

But back to some recent observations:

Housing inventory continues to be tight. When talking about the supply of housing, we look at the months of supply (i.e., if no other properties come on the market, how many months will it be until there are no homes left — assuming the same absorption rate as today). In August 2018 in Washington, DC, there was only 1.76 months of supply (Source: MRIS), which was actually up 9.5% versus last year. To put things in perspective, six months of supply is considered a balanced market. In Arlington, VA, that number increases to a whopping 1.87 (but that’s down nearly 17% from the same time last year). If we look toward Montgomery County, that number jumps to 2.96 in Bethesda but is the lowest of the four cities at 1.74 for Silver Spring. Of course, these numbers vary depending on the specific neighborhood and the housing type (see above) and size (e.g., for townhouses in DC, there is only 1.37 months of supply).

Interest rates are gradually rising. Interest rates have been slowly but surely increasing. In August 2018, the average commitment rate on 30-year fixed-rate mortgages was 4.55% (Source: Freddie Mac). In August 2017, that number was 3.88% with a 2017 average of 3.99%. By contrast, that annual average was as high as 8.05% in 2000. Overall, interest rates are still competitive (nowhere near the 18% rates seen in the fall of 1981) but locking in a rate now can save you meaningful money on your monthly payment and over the life of your mortgage (or until you refinance). It’s important to note that just because the Fed increases interest rates by 0.25%, for example, that doesn’t mean mortgage rates will go up a quarter point (however they usually trend in the same direction).

Average 30-Year Fixed Mortgage Rates (Source: Freddie Mac)

It’s still competitive out there…but not as much as before. It was only earlier this year that we were hearing stories of 15+ offers coming in on area properties. Of late, however, there are still many multiple offer situations and short offer deadlines but to lesser extremes. Many agents attribute this to buyer fatigue (yes, it’s wearing on you to make offer upon offer only to lose out…again). While a buyer last year that heard there was a deadline and multiple offers in hand may have put on their battle gear, some buyers now are talking themselves out of the running and not writing.

Pricing matters more than ever. Pricing is always the most important consideration when taking any property to market. Many sellers (and some agents) mistakenly think that because of the limited inventory and high demand, they can command large premiums. The truth is that while there will always be properties that set new records and buyers willing to waive appraisal contingencies, most buyers are closely examining the comps with their agent-advisor and nervous about overpaying (thinking there may be a growing housing bubble). An overpriced property can sit on the market for weeks or months longer than it should (and time is money, if you’re the seller).

So. what does this mean for you as a seller and/or buyer?

1. If you need to sell your home, now is a great time to do so (provided you price and market it correctly). However, be prepared to possibly face challenges buying your next home if you are staying in the region and talk to your lender and agent as to timing and how to best set yourself up for success.

2. If you’re ready to buy but not in a hurry, run the numbers. Having flexibility as to when you can or need to buy is a blessing and a curse. Having a little bit of urgency is helpful when making a decision but, with limited inventory, you can avoid being forced to make a less-than-ideal choice. As interest rates rise, your lender can help you model out the impact of future increases so you can take the extra cost into account when considering each property and the opportunity cost of waiting.

3. Always be prepared. As a buyer, if you’re ready to move swiftly, you may come out ahead. With lighter competition, what it takes to go from offer to contract may be less than you think. Consider working with a lender that can underwrite your file prior to placing an offer and be ready to see properties as soon as they hit the market (or to explore off-market opportunities your agent may bring to you).

4. Don’t decide what’s best for you by what others are doing and/or saying. This is true in life and real estate, isn’t it? I started off this post by reminding us that there are dozens of factors that can come into play when deciding whether to buy or sell. Information and analysis are key, so make sure you have a partner who will ask the tough questions (often more than once) and arm you with insights that will help you make the best decision for you.

Amber Harris is the owner of At Home DC and a licensed real estate agent with Keller Williams Capital Properties working with clients in DC, Maryland and Virginia. 

DC Real Estate: 2017 Market in Review

There's no question that Washington, DC is a hot market for real estate. With a growing population and limited inventory, the city is still what we consider a seller's market. 

Copyright © 2018 MarketStats by ShowingTime. All Rights Reserved.
Data Source: MRIS. Statistics calculated January 4, 2018.

A few 2017 stats of note (with more in the chart above and downloadable here):

• With 9,250 sales last year there were nearly 9% more transactions in 2017 vs. 2016 (but demand still dwarfs inventory). 
• Average Days on Market continues to decline year of year and, while the average was 35 for 2017 we saw a peak of around a week at times during the year. Nearly half of those homes sold in 10 days or less.
• Average Sold Prices are up nearly 5% vs. 2016, with detached units outpacing attached counterparts. 

What does that mean for you? Well, if you own property in DC (or one of the nearby Virginia or Maryland suburbs), now is a great time to sell if you are looking to move up or downsize or (gasp!) leave the region. However, if you are looking to enter the market as a buyer, you likely will still need to call upon your preparation, patience and persistence...but you can do it!

In order to best prepare, consult with a local market specialist well in advance when you want to make your moves (and move). If I can be of assistance, reach on out! 

Amber Harris is the owner of At Home DC and a licensed real estate agent with Keller Williams Capital Properties working with clients in DC, Maryland and Virginia. 

7 Tips for Enjoying the 4th of July in DC

Source: Carol M. Highsmith's America, Library of Congress, Prints and Photographs Division

It's hard to think of a better place to spend the 4th of July than Washington, DC. Decorating the front porch this morning with some seasonal red, white & blue (including these burlap stars from Pottery Barn that are on sale now), made me realize that there are so many layers to spending the holiday in DC than just taking in fireworks on the Mall.

So, here are a few observations and tips (in no particular order) - whether you live in DC or are just visiting:

1. The Mall isn't the only place to be. While you definitely should experience the 4th on the Mall at least once, it can take up most of your day and means arriving early, fighting crowds, etc. You might want to consider other prime viewing locations in DC, such as the Armed Forces Retirement Home in Petworth. The hilltop location provides great viewing and the sixth annual celebration features food, drinks, music and kids can even fish in the Soldiers Home pond! (Curbed has more recommendations, as well).
   

2. Fireworks aren't just for the 4th. You may have already seen fireworks stands pop up in your neighborhood and DC's residents love to celebrate well before (and sometimes after) the holiday has passed. While most often you'll hear smaller fireworks, don't be surprised if neighbors bring in larger scale fireworks (legal or not) and create impromptu displays. If you have a dog that isn't a fan of fireworks, plan ahead with the remedy that works best for them - from a ThunderShirt and mood music to natural and prescription medications.
   

3. Plan ahead. Whether you are hosting family and friends for the holiday or just a BBQ/get-together, run your errands early to avoid lines and picked over aisles. Of note, during a Target run yesterday, I found some great party favors and decor, but I am pretty sure they won't last long.
   

4. Get to know your neighbors. Okay, so this is general advice for any person in any community, but the 4th of July is a great time to introduce yourself to and spend time with your neighbors. Maybe you can host an impromptu popsicle party for the block on your porch (Firecracker® popsicles are my favorite) or you can set up a sprinkler in the yard or along the sidewalk for the kids to cool off in. Invite neighbors with fliers or through your local listserv or through Nextdoor.
   

5. Check out the Smithsonian Folklife Festival. This year, the Smithsonian is celebrating the 50th anniversary of its Folklife Festival. As always, it's a free event held on the Mall and featuring music, food, shopping, special presentations and more. The Festival runs from June 29 – July 4 and July 6-9, so hit it up before the 4th to beat the crowds (as much as possible).
   

6. Beat the heat at one of DC's pools. DC's Department of Parks and Recreation oversees 18 outdoor pools throughout the city. As a DC resident, admission is free...and non-residents can purchase affordable passes online (available for the day, month or longer). Arrive early to get a prime spot/lounger!
   

7. Visit a new-to-you restaurant or bar. While much of the activity will be downtown, take advantage of the holiday to explore neighborhoods further away from the bustle (ehem, Petworth)...they'll appreciate the business, you'll avoid the crowds and you may discover a new favorite haunt!

However you choose to spend it, I hope you have a fabulous 4th of July holiday! And if you have any tips and recommendations, feel free to leave them in the comments below!

Amber Harris is the owner of At Home DC, an interior decorator and a licensed real estate agent with Keller Williams Capital Properties working with clients in DC, Maryland and Virginia. 

Am I Ready to Be a Landlord?

After you transition from being a tenant to being a homeowner, many people come upon a new decision point: becoming a landlord or not. That juncture could come about for a few reasons, including:

1. You have to leave your beloved city/neighborhood for work, family or other pursuits.

2. You need to up or downsize in the same market.

3. You are contemplating investing in real estate and building a secondary (and maybe, eventually, primary) income source.

Whatever the reason, there are several important factors to consider before becoming Mr. (or Ms.) Roper (pretty sure at least 50% of my audience might need to Google this reference). In no particular order:

• What is your motivation? Perhaps the property holds sentimental value for you or you see an opportunity for even more equity by holding onto it. Either way, make sure you can articulate your motivation and use that to evaluate whether you become (and remain) and landlord.
  

• What is the rental market like currently? Do you live in a neighborhood near a hospital where you are likely to get residents or in a community that has a large expat population? And, just as when you are buying or selling, you must consider inventory levels - total volume but also the availability of and demand for homes like yours.
  

• Does it make financial sense? It is hard to perfectly predict what will happen to any given market or economy, but you should start by running the numbers. Look at what similar properties are renting for in your neighborhood, itemize other anticipated expenses such as maintenance and costs for acquiring tenants (whether or not using a real estate agent) and determine if you want to manage the property yourself (harder to do if you are moving out of town) or higher a professional company (and pay a percentage of each month's rent). This is where a spreadsheet with formulas will help you run various scenarios. And don't forget that you may not have a tenant 12 months of the year, so you have to be prepared to carry your mortgage (if you have one) during periods of vacancy.
  

• What are the business and legal implications? In order to be a landlord, you should make sure your property is legal and licensed (UrbanTurf has a great writeup). You also need to make sure you are in compliance with any condo/HOA bylaws (if applicable) and are insured appropriately. Every market is different but some (like Washington, DC) are more tenant friendly - meaning a problem tenant can be an even bigger problem. If you're in D.C., you likely have heard of (or are familiar with) the Tenant Opportunity to Purchase Act (TOPA). If not and you intend to rent a property in DC, familiarize yourself with it.
  

• Will this impact other real estate transactions? If you intend on buying a second (or third) home, keep in mind that your existing mortgage on a rental property still counts toward your debt-to-income ratio (most lenders don't want to see this higher than 36% of your monthly pre-tax income) and can affect being approved for (and your interest rates and down payment required for) any additional mortgages. Talk to your mortgage broker to understand your options.
  

• Do you want to be a landlord? Your time is money. Whether or not you higher a property management company, think about the demands (and potential stress) being a landlord places on you and proceed with what feels right!

Finally, remember that real estate is not an incredibly liquid asset, meaning that it cannot be quickly sold (in comparison to stocks, etc.). If you anticipate a scenario where you may need the capital invested more readily, you might want to consider investing your dollars in other ways.

I have several clients that are thinking through becoming a landlord or selling right now, and there isn't one right answer for everyone. Consult with your Realtor and financial advisor to land on what's best for you - personally and financially.

Amber Harris is the owner of At Home DC, an interior decorator and a licensed real estate agent with Keller Williams Capital Properties working with clients in DC, Maryland and Virginia. 

5 Tips to Land Your Dream Home This Spring

Spring. The time of year when tulips, daffodils and cherry blossoms bloom (even if they are delayed)...and when homebuyers are ready to move! While market activity picks up across the country with the warming weather, it also means more competition - which can be a problem when there are inventory shortages.

U Street

According to Bright MLS, the Washington market has seen declines in year-over-year inventory for nine months (as of January 2017). This is great news for sellers, but it can lead to greater frustrations for buyers - especially first-time homebuyers who have not yet experienced the process. Of course, this doesn't mean you should throw your hands up in the air and stay put in a less-than-ideal home. Here are five tips to help put you in a better position to land your dream home in the DC area:

1. Enlist the help of a Realtor® now. Finding the perfect home is a stressful process for any buyer, so add a licensed real estate agent to your team. They'll shepherd you through the process, put your interests first and allow you to focus more on all the joys of homebuying and, eventually, homeownership. Even if you're not sure if now is the right time to buy, having an agent on your side can help you make that determination and be ready when your dream home hits the market.

2. Spring clean...your credit! If you haven't already, take a close look at your credit and take steps to bolster your credit score and increase your ability to get approved for a mortgage at the most favorable rates. This may mean reducing existing credit card debt and paying extra close attention to avoid late payments on any bills (more tips from MyFICO.com). 

3. Have your list of must-haves and nice-to-haves, but be open. Most of us have pictured our ideal home for years but they almost always are out of reach. The homebuying process is rooted in trade-offs but talk to your real estate agent about options you may not have considered, such as a fixer upper (and a 203k loan), alternate neighborhoods and properties with income potential (such as a basement unit you can rent out).

4. Be the early bird and catch the worm. In a market with low inventory, preparation and timing is key. In addition to being pre-qualified or pre-approved for a mortgage, take advantage of your Realtor®'s access to information not yet available through the many online real estate search portals. Agents - through relationships and their tools - often know about inventory three weeks or more before it hits the market (allowing you to see properties first and, if it's a fit, make an offer).

5. Choose an agent who knows your target neighborhood(s). DC and its neighborhoods are unique and diverse (part of what makes our region so great), so find an agent who knows (or, better yet, lives in) the neighborhoods you are honing in on. Google and public records can only tell you so much, so tap into the knowledge and expertise of your agent.

Here's wishing you luck on your homebuying journey this spring. If you are looking in DC area - and especially if you are interested in Petworth, Columbia Heights and Brightwood - I'd love to meet you and discuss your needs. 

Amber Harris is the owner of At Home DC, an interior decorator and a licensed real estate agent with Keller Williams Capital Properties working with clients in DC, Maryland and Virginia. 

Hungry? 'Washingtonian' Announces 100 Very Best Restaurants 2017

Let's face it. DC's food scene is amazing...and still on the rise. 

Washingtonian Magazine just released their 100 Very Best Restaurants 2017 list, and it is drool-worthy! While I already had a working list of spots I still need to hit up, this has only made me more motivated to taste all that our amazing city and region have to offer!

Photograph by Jeff Elkins for Washingtonian

Of note, I'm excited to see one of my local favs, Timber Pizza Co., make the cut. Here's hoping we see some other neighborhood haunts (ehem, Little Coco's and Mezcalero) join Timber and Himitsu next year.

Window on DC: Making Meaningful Wall Art

Last year, my neighborhood lost a longtime resident and cherished neighbor and, as her house is redeveloped, I was able to salvage a bit of Petworth history and a memory of one of my favorite neighbors, Miss Erma.

Miss Erma Greeting Bea on Her Porch

Miss Erma was among one of the first residents I met on my block when I moved in several years ago, and I miss walking by her house to say hello during daily dog walks (she's pictured at left enjoying a regular visit from my pup). As the construction crew rehabs her house and prepares it for new neighbors, I was fortunate to snag the two original windows from her house that were left for the next haul of debris. 

I have never reclaimed a piece of history for wall art before (though I have often thought about it watching HGTV or visiting Community Forklift), so I decided this would be a worthwhile opportunity. While there are many articles and blog posts online about taking vintage windows, doors, mantels, etc. and repurposing them as art, tables and more, I was surprised how few mentioned the possibility of lead paint. Luckily I was acutely aware of the likelihood of led paint on the frames (houses on our block were built in the early 1900s), and I bought a test at the local hardware store before doing anything.

As suspected, the windows showed signs of lead paint, so I halted further work until I could get the supplies needed to take precautions before preparing them to come into my home. I am not an environment hazard expert, but I found this information from the New York Department of Health helpful in deciding on my approach. 

Windows Before (Interior Side on Left)

Windows After Careful Cleaning

Polyurethane Used to Seal Windows

Windows During Poly Process

Window vs. Windows

While I had toyed with keeping the glass (after removing/replacing panes, and even adding a mercury glass effect), I ultimately decided to leave the windows without glass (they are substantially lighter for hanging, as well). While wearing protective gear, I removed layers of caulk and used a wire brush to remove loose paint and a coarse sandpaper to tackle any potential splinters. After a quick cleaning with soapy water to remove any remaining dust and debris, I let them dry before sealing with Varathane Triple Thick Polyurethane in a matte finish. The poly dried to a tacky finish in two hours and was ready to come inside a few hours later (no smell at all).

I decided to hang the windows with the weathered white paint facing out, pairing with an existing original drawing already hanging in my home. I love having a constant reminder of a dear neighbor and a bit of DC's history on my wall. 

Have you recycled any architectural elements for your home? I'd love to hear about them!