Are you interested in house hacking Washington D.C.? The nation’s capital is a city where there is always a lot going on because it is where the halls of power for the federal government are located, not to mention home to some of the most respected universities in the country.
The area is thriving economically and tends to be insulated against recessions, but is this a good location for investing in properties? Does it make sense to house hack Washington DC?
In this post, we’re going to do a deep dive into the demographics, statistics, and all the data points you need to fully analyze this market, know the pros and cons, strategies for this market, and decide whether or not it’s the right one for you.
Let’s dive in!
Washington: Tenant Friendly, or Landlord Friendly?
The District of Columbia has a reputation for being very tenant-friendly, and that reputation is well deserved. In fact, there are some laws on the book that may very well scare off some landlords from the DC area entirely, though the property appreciation is enough that some might be willing to take the risk.
Washington D.C. has rent control, there are protections on security deposits, high expectations for property maintenance by the landlord, and tenants can legally challenge raises to rent. In addition, there is a law that if a landlord is selling a property, they have to offer the property to the renter first, giving them first opportunity to purchase.
That definitely puts DC in the group of among the most tenant-friendly cities in the country so if that’s a deal killer but you need something in the area, it’s worth looking at Arlington, Alexandria, and other nearby cites that are under Maryland or Virginia jurisdiction as opposed to the District of Columbia.
Take some time to consider this for your own risk tolerance and determine if house hacking Washington is right for you.
Washington D.C. Real Estate Demographic Data Analysis
There are six primary benchmarks based on demographic data that we use when analyzing a market to look at its viability for profitable real estate investing.
Those main statistics are: population growth, income growth, property value growth, crime level, crime change, and job growth.
When it comes to these six metrics, this is how Washington compares to our benchmarks:
|Data Point||Benchmark (since 2000)||Washington D.C.|
|Property Value Growth||40%||321%|
|Crime Level||< 500||491|
|Crime Change||0% or declining||0%|
|Job Growth||> 1%||1.95%|
Based purely on the numbers, Washington shows potential for house hacking hitting every single one of our demographic points, though just barely making it on both Crime Level and Crime Change. However, the Property Value Growth was exceptional over the past two decades.
Based on the numbers alone, a Washington house hack has some potential. It is important to make sure you have the risk tolerance for investing in such a tenant-friendly and regulated area, but if you do there is serious potential here.
5 Strategies for House Hacking Washington D.C.
Washington D.C. is not a market you can effectively house hack without a good strategy. The rising property values make it very expensive to buy, and the high standards for landlords and rent control can make cash flow challenging.
Look for Multi-Unit Properties
Because of strict rules around construction, you will run into a very high number of duplexes compared to other multi-unit properties, which makes it more likely to find a duplex while searching the D.C. market and slightly less likely to find other types of Multi-Unit properties.
The mean average price for multi-unit properties is a bit lower than prices for a detached house, but this is thrown off by the fact there are some very, very expensive individual houses in DC.
The breakdown is as follows, and shows why house hacking DC for that rent money is a good strategy for being able to afford such an expensive city.
- All housing units: $780,744
- Detached houses: $981,057
- Townhouses or attached units: $773,397
- 2-Unit duplex structures: $838,947
- 3-Unit or 4-unit structures: $828,122
- 5+ Unit Structures $577,588
The Median Gross Rent is $1,603 for the Washington DC area.
Even with that rent, getting actual cash flow without at least 2 rents coming in is going to be a challenge. If the main goal is appreciation versus cash flow, that rent money is still going to be handy with the monthly payments that mortgages this size will require.
Renting by the Room
There’s no lack of a need for affordable housing in the DC area, and renting by the room is a viable option for several reasons including:
- Multiple universities in DC (George Washington, Georgetown, Howard, and even George Mason is relatively close by)
- Very high rents can make it hard for those moving to DC to start with a house
- The huge number of jobs that are short-time by definition in politics and related fields
The story in late 2022 highlighting how a young Congressman couldn’t find an apartment goes to show that rooms for rent are in very high demand, and sometimes even those with high incomes struggle to find a place.
Renting by the room opens up the house hacking potential of a single family property with multiple bedrooms. While you give up some privacy, sometimes it can be nice to have company especially if you get good at picking the right housemates – and the rent checks will definitely help ease the monthly pain when the mortgage payments come due.
Using VA or FHA Loans for Funding
While Washington DC certainly isn’t the same challenge as finding affordable housing in Austin, San Francisco, or Los Angeles, it’s still a high price point for entry. This makes creative or helpful funding sources crucial to get the best deal on a property to house hack.
VA loans are a great option for veterans, and the classic FHA loan is a great way to get the foot in the door with only 3.5%, while house hacking can help make up for the higher mortgage payments that will be necessary when not paying a full 20% down.
Looking for creative or helpful options beyond conventional loans is going to be crucial for many investors to get into this market, and that’s where a good Washington house hacking strategy really comes into play.
Look for Viable Short-Term Rental Properties
Washington is a city with a lot of visitors, and many people who work in the city have families who live elsewhere. This opens up the potential of some very profitable short-term rental rates for the right properties.
In better, well-located neighborhoods this can be a great way to create good cash flow and maybe even cover most mortgage payments over the course of a year.
Look at Sleeper or Commuter Locations
If finding a deal in DC is too tough, keep in mind that there are multiple sleep communities surrounding Washington in both the state of Virginia and the state of Maryland. While an idea of a commute might not be appealing, the real estate markets in places like Fairfax, Alexandria, and Bethesda have less expensive properties and many safer neighborhoods that are more affordable.
While this isn’t the full in-city Washington house hacking many are looking for, the areas surrounding DC have also grown in size and value, making them markets that are still worth considering depending on your specific needs and investment criteria.
Should You House Hack Airbnb Washington DC?
Washington is a very interesting city to house hack for Airbnb purposes. Why? Because there’s a high demand, but this is also a high crime city and finding the combination of a good property in a safe neighborhood that is well-located can be challenging.
That said, if you have good success finding a property that meets these criteria, then house hacking DC should be a priority as the rates, especially during holiday times, are remarkable.
Washington DC Neighborhood Real Estate Review
Washington is known as a city with some very high end neighborhoods and also some very high-crime neighborhoods.
Good Neighborhoods for DC House Hacking
- 18th St Corridor
- Mount Vernon Square
- Dupont Circle
- Capital Hill
Some of these are great neighborhoods but very hard to find an open place in. Some are more working class but potential up-and-comers where the neighborhood has some rough edges but more properties that can turn a profit.
Do your proper due diligence to make sure you find a property that you are comfortable with, but these are good places to start.
Bad Neighborhoods for DC House Hacking
- Washington Highlands
This is mostly based on crime/safety numbers that focus on each neighborhood in comparison to others in DC with special consideration given to violent crimes or outside influences that need to be considered to more accurately draw an idea of the roughest neighborhoods.
It’s worth noting that two traditionally sketchy neighborhoods: Bellevue and U Turn have had major improvements since 2000. They are still very working class, but there are desirable areas and they are neighborhoods that despite the issues are clearly trending in the right direction.
Should You House Hack Washington DC?
Washington DC is an interesting and challenging market, and one that is very expensive to get into. While there’s a lot to scare investors off, for those who aren’t afraid of the extra upkeep regulations or high prices, there is some serious potential to be found here.
Because Washington DC is an expensive market, it’s also worth pointing out that the famous BRRRR method is really hard to pull off without tons of cash, while duplex house hacking is a much more effective method for getting into the DC market for many investors.