Home sales prices are up across the region. Northern Virginia, comprised of Arlington, Fairfax, Loudoun, Prince William, and Stafford counties, is one of the strongest real estate markets in the country. Still, it’s very different than Southern Virginia and other parts of the state such as Chesapeake, Newport News, and Virginia Beach. The southern part of the state is a rich fix-and-flip environment due to better real estate prices. In all the markets, there is strong job growth and job growth drives much of the housing market.
The Washington D.C. Real Estate Market
In addition to international businesses, D.C. is home to several Fortune 500 companies. These include Danaher Corporation, Fannie Mae, and Lockheed Martin. Major employers include government contractors, cybersecurity firms, and technology companies. On top of that, Amazon is building a second headquarters in Arlington, Virginia.
D.C. is very competitive. With low inventory and high demand for housing, investors are chewing each other up to get the deals. Rising interest rates mean that investors can get better deals on capital sooner rather than later, and the Nonfarm Payrolls report released by the Bureau of Labor Statistics in early February 2022 shows the region to be white-hot.
Median home prices in D.C. are higher than in other parts of the country, but not quite as high as markets like New York and San Francisco. And because of the nature of the employment market, rentals are a great sector to be in. Jason Redding said the rental market in D.C. has cooled about 0.4 percent since the pandemic hit, but compared to the national average, that’s terrific. Still, it’s difficult to predict the long-term rental market because some of that is driven by the recent remote work trend.
Northern Virginia and Maryland Are Commercial Real Estate Hotbeds
Northern Virginia has one of the strongest technology corridors in the nation. That translates into great job opportunities. Jason said the office market in the area rivals South Manhattan’s, which means that commercial rentals are hot and, if the job market keeps going up, there will be room for single-family rentals and fix-and-flips. Northern Virginia is home to a lot of biotechnology companies. In fact, Northern Virginia Community College offers one of the strongest biotech programs in the country.
Maryland, and Baltimore in particular, also have strong real estate markets with strong job growth. Maryland has done a good job of attracting businesses to the state, Redding said. In fact, Maryland’s commercial real estate landscape now rivals that of Northern Virginia. And, of course, you can’t forget about John Hopkins and the medical community in Baltimore, which Charm City is one of the best real estate markets in the country.
What’s the Hottest Fix-and-Flip Market in the Mid-Atlantic?
In general, the Mid-Atlantic fix-and-flip market is strong, but it’s stronger in those cities and neighborhoods where real estate is more affordable. Baltimore has a very strong fix-and-flip market because many homes are older and need updating. But it also depends on the neighborhood. Some Baltimore houses can be expensive, but the city is often ranked in the top 10 fix-and-flip markets in the country. In January 2022, the Motley Fool reported (based on ATTOM data) that Baltimore is one of the top fix-and-flip markets in the U.S., largely because of its gross profit of $145,000 per investment. “The only disadvantage to fix-and-flips in Baltimore,” Redding said, “is that wages might be higher than in other areas.”
D.C. also has a strong fix-and-flip market, but it’s different than Baltimore’s. Jason calls D.C. fix-and-flip neighborhoods “ticker-tape” neighborhoods. The city has a lot of row houses. Investors can rehab one or two in a neighborhood and get a good feel for the costs involved, the labor, and the sales prices, then just go street by street and block by block knocking them out like clockwork. He said the same thing happens in Richmond, Virginia, two hours south of D.C.
“Houses in the same neighborhood are similar in terms of investment and potential ROI,” he said. That’s partly due to the age of the homes. Richmond is one of the oldest cities in the U.S. and has a lot of houses from the colonial period. Even younger neighborhoods may have houses that were built with similar styles and will have similar rehab issues.
Farther south, the real estate values are different. Home prices are higher in closer proximity to D.C. That changes a lot for fix-and-flip investors and makes Virginia Beach, Newport News, Chesapeake, and Lexington very good markets for fix-and-flips. For one thing, neighborhoods in those towns are growing by 10 percent year-over-year, or more. Investors with systems in place that help them move their inventory quickly will be successful.
Baltimore and D.C. Have Strong Rental Markets
In the areas with higher-priced housing, like D.C. and Baltimore, rentals are very strong. At the beginning of the pandemic, the D.C. vacancy rate peaked at 6.8 percent, Jason said. Since then, its come down to 5.9 percent, still well below the national average of 6.5 percent. The hottest neighborhoods are walkable. If there’s a good transportation system and low crime, those are the best areas.
Many investors are keeping an eye on interest rates. The expectation is they will go up, which will affect the cost of capital. In turn, that will influence the multi-family and single-family rental markets. It could drive many investors to cash. At the end of the day, a strong rental market is any neighborhood where families can’t afford to buy.
How to Succeed in Mid-Atlantic Real Estate Investing
In a low-supply-high-demand market, real estate professionals must be aggressive without being careless. The rising cost of real estate is driving investors to smaller towns, especially Southern Virginia, for better prices. A highly competitive environment means investors must distinguish themselves and have a solid strategy. One way to do that is to specialize in a particular neighborhood. Another way is to specialize in a particular type of deal—fix-and-flips, single-family rentals, or period homes, for instance. And look for neighborhoods that are growing, indicating increased opportunities. Investors who understand the neighborhood they’re dealing with have a leg up.
There are a lot of opportunities with foreclosures and auctions in the short term. “In-person auctions are opening up again,” he said. Investors should be patient and wait for the right deals, have a solid strategy, and take the time to learn a neighborhood before diving in. You should also have your contractors lined up and your supply lines in order, especially if working fix-and-flips.
The biggest challenge in the Mid-Atlantic is buying the right property, buying in the right market, and buying at the right price. Sharestates encourages investors to buy near transportation hubs and in high-growth areas. In Baltimore, some neighborhoods are growing by 38 percent; others by just 5 or 10 percent.
Bottom line, do your homework. When you need a loan, call Jason Redding.