Two words sum it up:
Similar to a stock’s price to earrings multiple, prices per square foot show what the market is valuing real estate properties. There are 35 neighborhoods across DC with prices ranging from $125 to over $1,000 per square foot (pos).
For people looking to buy and live in their newly purchased home, PPS may not that big of a deal. Home ownership has been a great way to build assets over the years, because you need to live somewhere. However, since there are expenses involved in owning (taxes, insurance, mortgage interest, condo/association fees, upkeep, etc.) other major asset class are typically much better vehicles to invest passively.
Let’s say you buy a $800,000 home here in DC with a 5.25% interest rate, you’ll make a 20% downpayment of $160,000 plus total payments of $1,590,247, plus any upkeep on the home. That means in 30 years, it will have to be worth at least $1,750,000 to make money, which over 30 years, means a net gain of approximately 2.75%.
In DC that shouldn’t be a problem, but this route is still not an investment. For real estate investors there are just two options:
1. Buy and lease
2. Fix and flip
There are still opportunities in DC to buy undervalued properties and make money leasing, whether you fix it or not. There are even more opportunities to fix and flip in many up and coming areas around the city. Over the weeks to come, I plan on posting some of both found via MRIS.
If you have any questions, let’s talk.