First-time buyer


I am a first-time buyer and I feel like I’m in a real pickle. I am trying to find a home to live in for a while and then rent it out later. I live in the Washington DC area and I can’t seem to find any properties that fit my requirements. My mortgage payments seem like they will always be a lot higher than what I can get for rent. I really am not sure what to do. Any advice would be appreciated.


A large downpayment or an Option Arm will keep your payments low.

what is an option arm?

Option Arm allows borrower to make “min. Payments”…I.E., Negative Amortization. Instead of paying down the principal balance on the loan or just paying interest you are only paying part of the interest payment with a min. payment…so the principal balance owing increases.

I live in the Washington DC area and I can't seem to find any properties that fit my requirements. My mortgage payments seem like they will always be a lot higher than what I can get for rent. I really am not sure what to do.

If you are truly investing in DC proper…you are not going to find any “bargain” deals unless you know someone. There really isn’t any place else to build, in DC, so what already exists can command whatever price it wants.

I have about a dozen clients in the DC “metro” area which now reaches well past Manassas. I just completed a purchase in Linden, VA which is a little over an hour outside of DC and it is classified as a part of the suburban DC area. Most of my clients are investing in “speculation” areas. (Areas that may become hot spots.) However, even those are not great deals.

I moved from the DC area partly because of this…

Mark - my parents live in Culpeper (75+ miles out) and the urban spread is reaching them! People actually commute from West Virginia and Pennsylvania.

I am of the opinion that the chances of buying properties that are in the commute range of DC and actually cashflowing them (to the positive) are very few and very far between. Between the excessive purchase prices and the escalating taxes, it is becoming virtually impossible to cashflow.


my brother lives in Northern VA; that market looks like here in SoCalif. Its almost impossible to get things to cash flow.

Buy the house becuase you can afford it and like it; if you can rent it later, then its a bonus.

Great care should be used when taking Option ARM/Neg. Amort. Loans. If need to go this route to make the numbers work with respect to the size of the payment you can support with your current income, then you need to probably careful evaluate your finanical situation.

Thanks for the advice. I’ve been looking since I posted on this board and still haven’t found anything that would bring in any cash flow so I’m probably going take all of your advice and buy an affordable home and look into a Option ARM/Neg. Amort. Loan. I’ll probably start looking outside the DC area for rental properites. Thanks again.


You might be able to cashflow in Manassas, Woodbridge, Frederick (MD), Culpeper, etc. The real outlying communities sometimes have some lower -priced properties but these are getting pricey, too.



I definietly noticed that the areas you mentioned were more likely to bring in cashflow than Arlington, Alexandria, or Fairfax County.

I found a property about 3 hours away in Southwest VA that is affordable for myself and I know would bring in positive cashflow. Would it be a good idea to buy this property? They are asking $100k and I know it would bring in $200/month. The only problem is that it is 3 hours away and I have heard that you should stay close to home when you are first starting out. Thanks.



I will only invest in the parish that I live in. That said, there are plenty of opportunities here so I really don’t have to stray. I want my investments close to me so I can watch over them.

Other investors rely heavily on managment companies to “guard the stock”…each to his/her own but I do my own management, etc. Given the current market conditions in the greater DC area, investing elsewhere may make sense if you can find a good managment agent/service.

What town is the property in (you can hit me with a private message if you don’t want it public in the forum)…?



The property is located in Roanoke, VA. How much does a property management company cost? I’ve heard about 5%. If that is true, I think that I would be ok with that.


Normally, decent management runs 7-12% of the gross rent, 10% is the usual norm. I can get 7% here. You should always figure management into your cashflow analysis anyway. The reason for this is that someday you might not want or be able to actively manage the property and, if that happens, the cost is accounted for. And, if you do it yourself, do you want to work for free? (If so and you’re good, I might want you to manage some of mine!)…

I know Roanoke – sort of. Not sure of the rental market strength there. I would be a bit concerned about the vacancy rate. Make sure you do your homework. You might also look over to the Winchester/Front Royal area.


Thanks for the info Keith this will be very useful. I like the Winchester/Front Royal area idea, I could probably put a decent downpayment there and it isn’t too far away.

I have one more question. I have decided that I’m going to go ahead and put an offer on a property I found in Arlington, VA for my primary residence. This is going to be my first offer that I have ever submitted on a property, so I was wondering if you or anybody else had any advice on what to put in an offer.

I happen to be from central VA so I know the market pretty well (currently living in SoCalif). I’ve spent some time look at statistics on appreciation and its kind of amazing that you see high appreciation rate extending very far out into the “countryside” of VA from the DC area. However, if you get into Central and SW VA, the appreciation is more modest and yes there are definate some cash-flow opportunities. On the flip side I have seen some real overpirced alligator deals where the now Seller clearly overpaid upon purchase. With that said, you have to know your market(regardless of where you are) and need a good team on the ground. For example, there are plenty of cheap duplexes and multi-unit families in Roanoke (big old houses, broken up into units, build in the early 20th century), but they are in less than desirable neighborhoods. You can make some money there buy t you need to know how to handle high mainetence, (probably) high tenant turnover kind of landlording (not a good place to start).

Prop mgmt in VA seems to run around 10% with discounts down to 7% for having many units with the same firm.

Good luck on the offer in Arlington. I would try and make “clean” and strong offer as possible. By “clean” I mean straightoforward where the T&C are standrad for the area (your realtor shuld be able to guide you). One thing I would AVOID is waiving the right to an inspection. I know this has become very “fashionable” in NoVa in recent years, but this really a bad, bad idea (IMHO). If you decide to go this route, keep inthe back of your mind that you might later find a $10k repair item that an inspection would have revealed. Thus if the Seller insisit on this then I was push for a lower price to compensate (or just walk away). I know 6 mn ago it was still a Seller market in NoVA; maybe the balance is shifting

aak is dead-on with the NoVA market…when I ‘cashed-out’, it was cowboys and Indians! We got eight full-price offers in 3 days and seven had escalation clauses. I would up selling for almost $20K over list price and the buyers waived all inspections and appraisals. I think that it has cooled modestly. At that time, you needed to get your offer in the first or second day and it needed to be strong. As a seller, the inspection waiver is the great but not as a buyer!


What is T&C? When you guys talk about a “strong” offer do you mean close to the selling price? I do think the market has cooled down some around here. Right now homes seem to be staying on the market longer, there are a fair amount of incentives being offered, and you see a fair amount of “price-reduced” type ads also. Seems like a good time to buy. Thanks for the info.

T&Cs is Terms and conditions. Thats all other stuff beyond the top line of the sale price that runs for the next 5-10 pages that most people ignor. This is important stuff (IMHO).

A “strong” offer is a relative term meansng in a seller market you would not want to look weak or unable to complete the transaction. The worst thing for a seller is to have a property under contract and then fall out of closing 3-4 weeks later due to problems with the buyer.

Its sounds like its a neutral market so don’t be afraid to offer 95% of asking price soi the seller will counter-back. The worst thing is to ask too low such that the seller just rejects the offer (you get no response or counter offer). I do not know what too low is for that market (your realtor should be able to advise you).

Other things to avoid that make your offer look “weak”

  1. Lower than standard earnest money (agina whatever is local “standard”)
  2. Long escrows (over 45 days)
  3. Narrow borrowing conditions (you should be able to be a 30 yr loan for under 7% with decent credit)
  4. Longer than normal inspection/continegecy periods
  5. Very low downpayment (sometimes can not be helped).

Also remember its a trade-off. If you need to do a very low downpayemnt then don’t make a super low offer on price; bring your initial price offer up some to off-set that and keep the seller interested. The idea being you might look weaker than competing offer in terms of getting a loan, but if you offer a higher price than the competing offer…you get the idea.

A phrase that should come outof your mouth all the time “what is standand or typical”. Use this info as the basis to decide what to offer on that specific item. Most times it good to the typical, but over time you will find you will change things to suit your needs as you do more complex deals.

Mike in Calif.

Thanks Mike, this is great info. I’m meeting with my realtor tonight to go over the offer and it should be submitted tomorrow.

A “strong offer” would also normally include a letter from the lender that states that you are approved an amount that would allow purchase of the property.

The offer I accepted was over asking, the buyers were pre-approved, they were requesting a close by the end of the month (no more payments!), and included an earnest deposit of $10K…they appeared serious!