Question: How has COVID impacted Arlington’s rental market?
Answer: Recent articles have shed light onto just how much COVID has hurt the apartment rental market in the DC Metro, including this article on rents dropping by 14% in Arlington and this article on rents in DC’s Class-A high-rise buildings dropping ~18%.
I have certainly experienced the difficult rental market in the last 10 months with clients who have struggled to find new tenants for their condos for months, even after significant price reductions. In some buildings, there are double-digit numbers of condos being offered for rent, with little interest.
I have also spoken to many condo owners who are turning to selling units after months of vacancy trying to rent them out, which is one of the reasons for last year’s explosion in condos listed for sale.
I took a look at last year’s rental market for apartments, townhouses, and single-family homes and compared it the previous four years to see how each sub-market performed. There’s a summary of key findings below and a detailed data table to follow.
Note that this only includes properties in Arlington that were rented through Bright MLS. Most commercial rental buildings do not use the MLS and not every homeowner with an investment property rents through the MLS, but the number of properties rented through the MLS is enough to make this statistically reliable data.
Condo rentals dropped in price for studios (-10.2%), one-bedrooms (-4%), and two-bedrooms (-1%). If you remove January and February (pre-COVID) listings, the price drops increase further. I suspect 2021 will see an even larger drop in rental prices because many owners are still trying to find a tenant.
The average time to rent a unit increased by 50% to two months and tenants negotiated significantly further below the asking price than ever before.
Two-bedroom units struggled, but not nearly as much as studios and one-bedrooms units, likely because the 2nd bedroom provides a much-needed home office.
COVID had the opposite effect on single-family and townhouse rentals with prices increasing to all-time highs, homes renting faster than ever before, and owners securing prices closer to their asking price than ever before.
Rentals of small two-and-three-bedroom houses and large four-bedroom townhouses were in the most demand, with average days on market just 3.5 weeks and some of the highest rental price to asking price ratios of any property type.
I expect single-family and townhouse rentals to have an even better 2021 (from the perspective of the homeowner) as people continue trying to get more space, avoid common living, and find buying those homes to be cost-prohibitive and/or too difficult (competitive).
Avg Rent $ to Ask $
Avg Days on Market
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
Question: What is the role of Business Improvement Districts in Arlington?
Answer: The Business Improvement Districts (BID) of Rosslyn, Ballston and Crystal Citydeserve much of the credit for turning these neighborhoods from convenient places to work to lively, family-friendly places to live.
Funded primarily by businesses located in the neighborhoods they represent, BIDs are an important bridge between residents, businesses and local government. Homeowners located in or near any of these BIDs can thank their leadership teams for increasing the value of their homes.
As a long-time Rosslyn resident, I have watched as Mary-Claire Burick and her team at the Rosslyn BID have transformed Rosslyn over the last five years.
I reached out to her for an interview to answer some questions about the role of BIDs in the community and how residents can take advantage of their influence on local government and business investment. Thank you Mary-Claire!
What is the role of a BID, and what role does the Rosslyn BID play in the community?
Business Improvement Districts are nimble organizations that wear a lot of different hats. In Rosslyn, we work on urban planning, transportation and business and community engagement, just to name a few.
But I think one of the most important roles that we play is that of a convener who brings together the perspectives of various stakeholders in our neighborhood –including residents, businesses and county officials — to advance initiatives that will help our community continue to thrive.
We are in constant conversation with folks on the street, in our restaurants and in our business community to better understand not only what they love about Rosslyn but also what they want to see improved.
How does the Rosslyn BID engage with residents and visitors?
As I mentioned, community engagement is one of our top priorities.
Probably our most visible presence on a daily basis is our Rosslyn Ambassadors Program. Our team is out on the street five days a week helping residents and visitors with directions and working to ensure our sidewalk and public areas are safe and clean. Be sure to say hello when you see them around the neighborhood in their purple shirts.
Our events are another important way that we connect and engage with area residents. In 2017, around 40,000 people attended more than 160 events that we hosted ranging from our popular Rosslyn Jazz Fest and Rosslyn Cinema series to lunchtime fitness sessions and pop-up concerts. Each one of these events represents a touch point for our team to engage with residents and employees in our region, and for interaction between these groups.
It’s that sense of community that these events help build that makes them so impactful.
What have been some of the BID’s most successful events?
Last year’s Rosslyn Jazz Fest was an incredible experience.
That event alone brought nearly 10,000 people to Gateway Park on one day, which was a record for us. The Rosslyn Cinema has long been a neighborhood favorite. Last summer, more than 20,000 people came out to catch their favorite movie. And it may surprise you, but Rosslyn is the largest pit stop for Bike to Work Day in all of D.C., Maryland and Virginia.
In 2018, we will continue to host these popular events, but are also introducing new activities and expanding others.
One example is the Rosslyn Farmers’ Market, which occurs weekly during the summer in Central Place Plaza. We’ve worked with FRESHFARM to introduce a new FRESHFARM Share program, similar to a community supported agriculture (CSA) program, to help bring more healthy food to Rosslyn residents and businesses.
I’d also like to point out that these events have a wider purpose and impact. They help bring thousands of visitors to Rosslyn who could one day be residents or tenants. And there’s an economic impact–restaurants and retail in Rosslyn usually see a boost in sales and exposure.
Some of the other local BIDs are Crystal City, Ballston and Georgetown. What are some of the most significant benefits of a community having a BID? Does a BID make sense for every community?
From my perspective, there are a lot of benefits that a community can realize from having a BID. But simply having a BID alone isn’t enough. It’s important for all of the stakeholders to have a clear vision for what they want to accomplish, and to ensure a BID has the resources and buy-in to help realize that vision.
A BID with a distinct mission can be a leading driver of change for a community, serving as a liaison between government, businesses and residents. Residents, in particular, have a real opportunity to utilize BIDs to help create a viable, economically sustainable community that reflects their vision of the neighborhood.
How have new restaurants and retail spaces helped change Rosslyn? Are there any openings you are particularly excited about?
Restaurants and retail have been a critical part of Rosslyn’s transformation from a commercial area to a more vibrant, urban, mixed-use area. Between 2015 and 2017, 17 new restaurants opened in Rosslyn, adding to the more than 65 restaurants, cafés and markets within a ten-minute walk of the Rosslyn Metro. We’ve also seen more restaurants and bars staying open later, like Barley Mac, Quinn’s on the Corner and Continental.
This year, we’re looking forward to the continued evolution of Central Place, which is bringing multiple new restaurant offerings to the heart of Rosslyn. I think folks are going to be really excited to hear what they have in the pipeline.
We are also excited for the Central Place Observation Deck, opening this summer. This 12,000 square-foot-space will offer an unparalleled view of the Mall and the U.S. Capitol. Offering snacks and light fare, the Observation Deck will be the perfect place to bring out-of-town friends, a date or a colleague for an after work drink.
How can residents get involved with their local BID?
Residents should utilize their local BIDs to advocate for what they would like to see in their community. Remember, a BID is there to serve the needs of a neighborhood’s residents as well as its businesses and visitors.
Residents can also get involved with their local BID by attending events, participating in community meetings and providing feedback on BID activities. Depending on an individual’s local BID, there may be opportunities to volunteer or be a community ambassador.
Question: Can you follow-up on last week’s column about condo/townhouse rentals with an analysis on the single-family home rental market in Arlington?
Answer: Thank you to ARLnow commenter Southy4Life for requesting that I follow-up last week’s analysis of the condo/townhouse rental market with a similar analysis of the single-family home (SFH) rental market.
The good news for those looking closely at the rental stats in Arlington is that the majority of SFH rentals are represented in the MLS data presented below, as opposed to a large percentage of condo/apartment rentals not represented in my data last week because most are handled outside of the MLS (commercial rentals, direct landlord-to-tenant).
Five Year Trends
Just like the condo rental market, there has been very little appreciation in rental rates in Arlington’s SFH home rates, until 2017, which saw a noticeable jump led by 22207, 22205 and 22203.
This doesn’t correlate to what we saw in the sales market from 2016 to 2017 so admittedly I don’t know why these three zip codes saw substantial rental growth, while the rest of the Arlington market remained relatively unchanged.
Below is a summary of the average cost of renting a SFH in each Arlington zip code over the last five years. 22206 and 22209 were removed for lack of SFH rental data points.
Below is a table of all 3-5 bedroom SFH rentals in Arlington since 2016, broken out by bedroom count and zip code, with rentals in 22206 and 22209 removed for lack of data points.
The most expensive home rented was a 7BR/7+BA home on Arlington Ridge Rd for $12,000/mon and the least expensive home rented was a 2BR/1BA home in Columbia Forest for $1,595/mon
It costs about 20% more to go from three bedrooms to four, 25% more to jump from four bedrooms to five
If you’re renting a SFH in Arlington, expect to take 5-6 weeks to find your tenant and be prepared to discount your rate by 2-3% from what you’re asking
For families looking to rent a home in some of Arlington’s top-rated schools, the 22205 zip code is a great value
75% of SFH offered for rent allowed pets, but only 28 had fully fenced yards
On average SFH for rent were built in 1950 and the average lot size was just over 10,000sqft (1/4 acre)
Only 49 SFH homes offered for rent were built in the last ten years
Our team is happy to assist you with rentals, whether you’re a renter or landlord, so feel free to reach out if you need assistance with either! We are happy to put together more specific, personalized data tables for your as well.
Question: I am moving to Arlington from out of town and not yet ready to buy. I’ve heard the rental market is high in the DC area and wondering approximately how much it costs per bedroom to rent in Arlington.
Answer: I spend a lot of time in this column talking about buying and selling homes in Arlington, but about 54% of the County is renters, so as we head into the busiest rental months, I thought it’d be appropriate to share some helpful statistics on the cost of renting in Arlington.
For the most part, renters tend to be more focused on functional space to meet immediate needs, so I like the idea of using cost per bedroom on rentals more than I do for ownership.
The good news for renters is that developers have added thousands of new rental units over the last 5 years, particularly 1-2 bedroom units in the popular metro areas of the Rosslyn-Ballston corridor and Crystal/Pentagon City. While the cost of these newer units has increased, it’s kept the cost of renting condos and townhouses from owners pretty stable (or down).
The data I pulled below is primarily made up of non-commercial rental units (condos and townhouses owned by individuals) and restricted to units leased through the MLS (agent database), so only included a portion of the total rental activity in Arlington. I also excluded single family homes from the dataset.
It costs about 40% more to rent a third bedroom than it does to rent a second bedroom
Rents have not gone up for one bedroom units, and have only increased about $100/month for two and three bedroom units
Most rental units are on the market for 6-7 weeks before being rented
There’s not nearly as much negotiating on rentals as there is purchases, with only about 1% or less negotiated off the asking price, on average
The least expensive rentals are in the 22204 zip code because there are not any walkable metro stations and the housing inventory tends to be substantially older
22204 is the only zip code where the average rent of a two bedroom is under $2,000/mon and one of only two zip codes (22206) with an average rent under $3,000 for a three bedroom
22209 is the most expensive zip code to rent by a wide margin due to the fact that it hosts two of the most expensive buildings in the DC Metro in Turnberry Tower and Waterview, as well as a host of other high-end buildings. It claims this top spot, despite also hosting one of the least expensive communities in Arlington, River Place.
One tip I’m happy to share with renters is that there’s rarely a better deal in the market than the deal you get being the first person to rent a unit in a new commercial rental building. The incentives they offer on the first lease usually include 1-2 months free rent, a period of free parking, and sometimes other fees discounted or removed (e.g. pet fee, move-in fee, etc). However, you should prepare for rents to increase substantially if you want to continue renting after your original lease expires.
Our team is happy to assist you with rentals, whether you’re a renter or landlord, so feel free to reach out if you need assistance with either!
Question: Do you think the recent changes to the rankings of Arlington schools on GreatSchools.org will have an impact on home values?
Answer: Sometime in the last few months, GreatSchools.org quietly changed their school ranking criteria, which resulted in a drop in every high school and middle school in Arlington by 1-2 points (10 point scale).
The two biggest K-12 public school ranking websites in the US are Niche.com and GreatSchools.org with about 6M and 4M monthly visits, respectively (SchoolDigger is a distant third with about 500k).
In my experience, buyers in the DC Metro rely more heavily on GreatSchools because Niche lacks differentiation between schools (everybody is a winner). The change in Arlington County Public Schools rankings on GreatSchools is worth noting and I suspect that it will have a negative impact on the housing market.
In the About section of GreatSchools, they explain the changes in their grading criteria with the following: “In the past, the overall GreatSchools Rating in most states was based on test scores.
In some states*, the GreatSchools Rating was also based on student progress (or “growth”) and college readiness data (SAT/ACT participation and/or performance and/or graduation rates).
Our school profiles now include important information in addition to test scores — factors that make a big difference in how children experience school, such as how much a school helps students improve academically, how well a school supports students from different socioeconomic, racial and ethnic groups, and whether or not some groups of students are disproportionately affected by the school’s discipline and attendance policies.
Many of these important themes now have their own rating, and these themed ratings are incorporated into the school’s overall GreatSchools Summary Rating.”
Old vs New Rankings
Below is a table showing the before and after scores for all Arlington County middle and high schools, as well as a limited set of Fairfax County/Falls Church middle and high schools (the ones I had documented scores for before the change).
All “old” scores are as of Fall 2017. Note that my request to GreatSchools for the “old” scores for all Northern VA/DC Metro schools was denied.
Why It Does/Doesn’t Matter
I’d be lying if I told you I knew what the impact will be to Arlington home prices and demand, but I think a negative impact will be felt to some degree.
Schools are at the top of many buyers’ criteria list and most of those buyers, whether they’re local or relocating into the area, set a minimum score for the school boundaries they’ll purchase a home in and rely on GreatSchools for their data.
Below are some points I came up with for why it may or may not have an impact on the housing market:
It Doesn’t: It appears the majority of public schools in Northern VA were reduced by 1-2 points on GreatSchools, so buyers are still as likely to choose Arlington as they have always been. The alternatives have not improved.
It Does: While the reduction of most school scores in Northern VA may not change where or what people buy, the lower scores may decrease overall demand in Northern VA housing and result in less motivated buyers.
It Does: I don’ know if Montgomery County and Northwest DC public schools saw similar changes, but if they did not, we may lose buyers to those jurisdictions because their relative value has increased.
It Doesn’t: It doesn’t appear that Niche.com has introduced any changes and Yorktown and Washington-Lee are ranked an A+ and Wakefield is ranked an A on that site.
It Does: Could the fact that Arlington’s highest ranking high school is now a 5 impact the decisions of employers considering a move to the DC Metro?
I have no doubt that over the course of 2018 I will have local and out-of-town buyers tell me they do not want to purchase a home in Arlington because it has poorly rated (high) schools.
For me and my colleagues who know Arlington, we will point them towards resources that show how great the entire ACPS system is. However, if you recall from my column in July 2017, about half of the agents who closed a deal in Arlington only had one or two transactions here, meaning that agents who don’t know Arlington well are unlikely to have the appropriate background to give their clients better guidance about our schools.
What To Do?
GreatSchools.org wields a lot of power over home values across the country and the drop in our ratings is frustrating, but just like a bad Yelp review for a restaurant, we have to acknowledge the change and find ways to offset it by making it easy for buyers to find more favorable information.
I’d love to hear from readers in the comment section who purchased or are in the process of buying a home in Arlington, who placed a lot of weight in the GreatSchools rankings – how would these changes have impacted your decision when you bought or how are these changes impacting your current purchase strategy?
If you would like to discuss how the new GreatSchool rankings impact your upcoming plans to purchase or sell a home in Arlington, feel free to reach out to me at Eli@EliResidential.com to set-up some time to meet.
Question: What were the real estate related changes in the new tax plan and how will those changes impact our local real estate market?
Answer: Spending an hour every week working on my taxes in QuickBooks doesn’t qualify me as a tax expert, so before I provide my take, I’d like to introduce local tax expert Molly Sobhani, CPA of Klausner & Company, located in Rosslyn, to break-down the key changes in the new tax plan that will effect how buyers and homeowners make real estate decisions. Following Molly’s explanation, I will provide my personal thoughts and stats, which stand in contrast to most of the opinions I’ve read.
If you would like to follow-up with Molly about the tax bill or any other tax questions, she can be reached directly at firstname.lastname@example.org or (571) 620-0159. Take it away Molly…
After weeks of confusing, convoluted and contradicting proposals introduced by the House and Senate, the Tax Cuts & Jobs Act (TCJA) was signed into law on December 22 by President Donald J. Trump. As the dust continues to settle on TCJA, taxpayers across the country are wading through the tax reform bill and the impact of those changes.
With increases to the standard deduction, changes to the deductibility of mortgage interest and limits on property tax deductions, current homeowners and potential homebuyers have a lot to think about. The housing market will undoubtedly be impacted but how – exactly – is still a big question mark.
Summary of Major Tax Law Changes Impacting Residential Home Ownership
Interest will only be deductible on mortgage debts used to acquire your principal residence or a second home of up to $750,000 (or $375,000 for a married couples filing separately). The phase-out of deductible interest begins after the loan balance exceeds $750,000. This new debt limit applies to all loans incurred after December 15, 2017.
Interest on home equity debt (also known as Home Equity Lines of Credit or HELOCs) will no longer be deductible. This is true regardless of when the home equity debt was incurred.
State and local taxes (also known as SALT deductions) will be limited to $10,000 per year. This category of deductions also includes property taxes paid on homes.
The Standard Deduction has increased substantially from $12,700 for joint filers ($6,350 for single filers) in 2017 to $24,000 for joint filers ($12,000 for single filers) in 2018.
One provision that did not change is related to the capital gain exclusion of up to $500,000 for joint filers ($250,000 for single filers) on the sale of a primary residence. You still must use the home as your primary residence for at least two of the last five years in order to be eligible for the full exclusion.
So why do these new tax provisions make homeownership a trickier decision? The incentives for being a homeowner have now been substantially diminished by the new laws for many taxpayers.
A Hypothetical Scenario
A married couple earns $150,000/year in wages and is looking to buy a home in Arlington, VA. Their total state income taxes are $8,625 (5.75% of their $150,000 wages.) They have no other deductions to itemize in 2017 so they will take the $12,700 standard deduction.
In January 2018, they buy a condo for $425,000. They put down 20% and borrow $340,000 at 4%. They are under the $750,000 mortgage debt cap so they are eligible to deduct all of the interest they pay on their loan each year. In the first year, their total interest expense totals $13,491. Their property taxes are $4,233 based on Arlington’s 2017 rates for a $425,000 assessment. Our married couple has a brand new home and all these brand new deductions, right?
But wait! After we add the new property tax deduction of $4,233 to the $8,625 they already pay in state income taxes, they are over the $10,000 limit for SALT deductions. In this example, $2,858 of their property taxes are not deductible.
Fine. Let’s look at their total deductions then: they have the maximum $10,000 SALT deductions and $13,491 of mortgage interest, totaling $23,491. Under the old tax laws, they would itemize their deductions and see a reduction in their Federal and state taxes for these additional expenses.
But we’re not working under the old laws anymore, are we? Under TCJA, even after spending all this money on buying a new home, paying the interest on their mortgage and paying their property taxes, they are actually still better off taking the standard deduction of $24,000.
As you can see from the example above, by increasing the standard deduction to $24,000 for a married couple filing jointly, many taxpayers who otherwise would have itemized may now benefit more from the standard deduction. This essentially takes away the tax benefit of owning a house for some people. And the question that many potential homebuyers may consider is: “Why bother?” More and more, they may delay the decision to buy in favor of renting.
Other Potential Effects on Housing Markets
Home values may be impacted, too, by the change in tax laws. If mortgage interest is limited to $750,000, houses that are listed at prices over $937,500 (assuming a buyer puts 20% down) may not be as appealing to new buyers as lower-priced homes.
Another consideration is how the disparity in state income and state property tax rates may drive homebuyers into lower tax rate states. In high tax states, there could be multiple scenarios in which taxpayers lose 100% of the tax benefit of paying property taxes.
Of course, there are other (wonderful) reasons to buy a home and other (wonderful) reasons to buy a home in certain neighborhoods. The upsides generated from the Tax Cuts & Jobs Act, though, are severely lacking.
Eli’s Closing Stats and Thoughts
According to The Washington Post, Moodys Analytics predicts that home values in Arlington will drop 2.3% as a result of the new tax bill, with drops of 2% in DC, 2.5% in Montgomery County, 2.6% in Loudon County and 4% nationally. Of course, this analysis is limited to the impact of the tax bill and doesn’t take any other growth factors into consideration. In other words, if Arlington continues its growth from 2017 (3.1%), we wouldn’t see actual losses, but stunted growth.
The change in SALT deductions and increase in the Standard Deduction will reduce the benefit of homeownership for many Arlington residents, but let’s take a look at how many homeowners are likely to be impacted by the reduction of the mortgage interest deduction limit to $750,000. Of the 3,100+ homes sold in Arlington in 2017, just over 400 were bought with loans exceeding $750,000. Approximately 30% of detached homes in Arlington (350 of 1,150 sales) had a loan exceeding the new limit. Keep in mind, however, that homeowners with loans over $750,000 will still be able to deduct interest on the first $750,000.
I Don’t Believe The Market Will Suffer
While these stats and Moodys’ analysis are great, they fail to capture how homebuyers actually make decisions in the real world. The majority of buyers decide to purchase a home because of a major life event (marriage, kids, job change, etc) and once they’ve decided to purchase a home, their budget is based on how much they have saved for a down payment and how much they can afford each month in housing costs.
Their monthly budget is primarily based on income and the sum of mortgage payments, property taxes, any HOA fees, insurance and maintenance. SALT and mortgage interest deductions don’t factor into any of the core considerations for most homebuyers.
Let’s Be Realistic
Let’s be honest, for most people, taxes are a once-a-year afterthought and tax planning is mostly crossing their fingers, hoping for a few dollars back. For those who do pay close attention to their tax exposure and who stand to lose out on the benefits of the mortgage interest and SALT deductions, I question how much it actually matters.
Previously, the mortgage interest was capped at $1M and there were just 163 (5%) homes purchased in 2017 with a loan of $1M or more who will be “fully” effected by the change to a $750,000 cap. In the first year, the interest paid on that difference of $250,000 is about $10,000 (drops each year), so for somebody with an effective tax rate of 30%, that’s a $3,000 change to their bottom line from last year.
Adding the change in SALT deduction increases that for many people and $3,000+ is nothing to sneeze at, but we’re talking about the wealthiest homebuyers with incomes exceeding $250,000/year. I’d bet that for those who are conscious of the net effect on their bottom line, they’re more likely to find ways to save this money somewhere else than their home purchase.
Plus, the tax plan provides substantial benefits to wealthy Americans and may very well have a net positive effect on their bottom line anyway. Also, does anybody really think that somebody negotiating on a $1.5M+ home they plan to live in for 15+ years will pay $5,000 less because that’s the calculated net impact from mortgage interest and SALT on their 2019 taxes under the new tax bill? No way.
Let’s be realistic about the psychology of home buying and what determines buying power because that’s what impacts home prices, not expensive studies funded by special interest groups (yes, I’m kind of calling out the National Association of REALTORS for fear mongering).
Where is it? Clarendon is probably the most recognizable, well-known neighborhood in Arlington. Those outside of Arlington often refer to the entire Rosslyn-Ballston corridor as Clarendon.
Technically it is bound by Wilson Blvd to the north, 10th St N. to the south, Washington Blvd to the west, and N. Danville Street to the east (eastern border is based on the boundaries of the Clarendon Sector Plan).
Clarendon is known for its lively dining and retail scene, along with being host to a popular chains like an Apple Store and Whole Foods, where the parking line regularly overflows into the street.
From rooftop bars, numerous restaurants and high-end retail, Clarendon attracts people of all ages to its massive condo and apartment complexes, as well as droves of patrons from outside the neighborhood. Depending on your preference for entertainment, it’s either the place to be or the place to avoid on Saturday nights. The neighborhood is built around the Clarendon Metro station, which is located on the Orange and Silver lines.
About the interviewee: Tim Donaldson moved to Clarendon in 2014 after spending eight years in Los Angeles, and chose the area because it provides the walkability of a city, but he can hop in his truck any time and quickly be on the highway, which he can’t do from D.C.
He started as a renter in The Phoenix, a popular condo building at 1020 N. Highland Street, and loved it enough to buy a two-bedroom condo after one year. He loves the amenities, and chose to buy because of how well run it is due to the long tenure of its staff.
What do you love about Clarendon?
I love the balance of being able to walk to everything, but not having to fight through city traffic to get to a highway, which I do often for work and to fish. It’s a big city lifestyle, but more laid back. You also have the convenience and familiarity of successful chains like Whole Foods, Starbucks, Cheesecake Factory and Lululemon, but also some great non-chain places for music and craft beer/wine. I’m sad the record store closed!
Where do you shop, eat, and hang out?
My wife and I have a long list of favorites all within a few blocks. Green Pig Bistro is our date night spot, we’re regulars at Lyon Hall, I go to Fireworks for their great beer menu, Galaxy Hut for awesome music, Ambar’s all-you-can-eat is the best deal around, Texas Jacks BBQ is second to none (I agree), love the classics like Liberty Tavern and Bonchon, and the new Spirit of 76 is a cool, cozy bar! We love being able to walk to Whole Foods or Trader Joes for groceries.
Do you take advantage of nearby parks and trails?
I take weekly walks at Potomac Overlook and Zachary Taylor parks and love biking the WO&D, Four Mile Run, and Mount Vernon trails. I know there are parks closer by, but I love hiking and biking those areas.
How has your overall experience been in Clarendon?
Very positive! I’d love to be able to buy a single-family home in Lyon Park (adjacent neighborhood) so I can stay close to Clarendon. People mostly associate Clarendon with weekend partying, but it’s an incredible community with an art show, crafts fair, and bike race during the year. Most of the businesses put out water bowls for dogs in the summer and there’s always families out pushing kids in strollers, which gives the whole neighborhood a feel of closeness that I love being part of.
Thank you so much for your interview Tim! I’m sure this will help people considering a move into or within Arlington who are looking for a vibrant, walkable community like you described.
Question: I’ve been renting my unit at the 1800 Wilson condos in the Rosslyn/Courthouse area for the last five years and am wondering why I used to get more rent five years ago than I do today, despite keeping the unit in great condition for each renter. Any ideas?
Answer: You may have heard that over the last five to six years, the rental market has hit all-time highs across the country, so it makes sense that you’d expect your rental income to increase. However, the increased rental demand and previously undersupplied luxury rental market in Rosslyn got the attention of some major developers, who recently built larger luxury rental buildings nearby.
Developer vs. Landlord
Landlords at 1800 Wilson and the neighboring Rosslyn/Courthouse condo buildings took a hit on rental income starting in 2013 as luxury apartment buildings Slate|Sedona, 19Nineteen Clarendon, and 2001 Clarendon added nearly 850 units to an undersupplied Rosslyn/Courthouse rental market, while offering deep discounts to new tenants in the range of one to two free months of rent (standard for new apartment buildings).
In the last year or two, each of the buildings have finished their initial leasing cycle and the incentives have expired at all three, so 1800 Wilson and other landlords in Rosslyn and Courthouse should see a small increase in rental rates.
Don’t expect a huge jump because rental supply is substantially higher now and Central Place, above the Rosslyn Metro station, just started leasing 377 luxury units. However, many of these apartments are in the ultra-luxury market and cater to a different renter than those looking at 1800 Wilson and similar buildings in the area.
I built a table of rental trends in condo buildings in Rosslyn & Courthouse with comparable 1BR/1BA and 2BR/2BA units. I limited data to 1BR units w/ 650-850sqft and 2BR units w/ 900-1,350sqft to reflect the majority of 1BR and 2BR units at 1800 Wilson. “Avg Discount From Ask” is the average difference between final rental rate and original asking rental asking price.
Question: After reading your article two weeks ago about remodeling before selling a property, I was wondering what your thoughts are on remodeling our rental property. It’s a 1BR + den a couple blocks from the Virginia Square metro with a perfectly functional bathroom and kitchen, but about 15 years old.
Answer: A couple of weeks ago, I warned about spending money on major remodeling projects before selling your home and you should be equally cautious about making major updates to a rental property. In your case, it doesn’t sound like spending $15,000+ remodeling the bathroom and kitchen is a good investment at this time. Here are some of the questions/factors you should consider:
How long will it take to break-even on your remodeling expenses based on projected increase in rent? A moderate remodeling of your bathroom and kitchen is likely to increase the amount you can rent your unit by $150-$200/month (this is case-by-case), meaning your pay-back period is likely 10+ years. Keep in mind that the market value of your updates will depreciate annually and usually at a faster pace under the wear and tear of a rental unit.
The ROI of remodeling is heavily based on the type of tenant you’re most likely to have. Your tenants will most likely place more value in convenience, affordability, and functionality than they do aesthetics and upgraded finishes/appliances. As the tenant profile shifts towards families and higher-end properties, the ROI of upgrades increases.
Length of Stay
The less time a tenant plans to stay in a property, the less concerned they’ll be with updates, but tenants planning to stay for three or more years will consider their rental to be more of a home and place great value in an updated kitchen and bathrooms. As the tenant profile shifts to longer rental periods, the better the ROI on remodeling. In your case, the tenant profile is more likely to stay for 12-24 months, diminishing the value of remodeling.
According to Joseph Aiken, CPA with Aiken & Company, the current tax code considers any capital expenditures on remodeling to be depreciable assets, meaning you can’t write off the cost of your remodeling in the year you spent the money, rather deduct it over a 27.5 year depreciation schedule.
My advice for investing in a rental property is similar to investing in pre-sale improvements. Fresh paint, quality floors, lighting, and a deep clean go a long way on a rental property without breaking the bank and can usually be written off as maintenance expenses on your taxes. Check out IRS Publication 527 for tax details on rental properties.
Question: I’m wondering statistically what the best months are to advertise a property for rental. On my own I can figure out it’s probably not the dead of winter, but was wondering the answer from a professionals data driven point of view.
Answer: The best way to measure this is to look at how long a home is on the market and how close the final rent price is to the asking price. Since 2010, the data shows that the best time to list your home for rent in Arlington is from March – June, with June listings moving the fastest and May listings commanding rents closest to the ask price. Homes listed for rent in November spend the most days on the market, taking an average of 25 more days to rent than homes listed in June. Somewhat surprisingly, landlords who list in September cut rents more than any other month, compared to the asking price. My guess is that it’s due to owners offering a higher original price because it’s still summer, but missing out on the spring/early summer rental demand.
Best Months For Landlords To List: March – June
Worst Months for Landlords to List: October – January
The data was pretty consistent across different housing types (detached/single family, townhome, and apartment) and by zip code. Check out each table below for some specifics on your home type and zip.
The data below represents all 12,256 rental transactions recorded in MRIS (Realtor database of record) in Arlington since Jan 1, 2010. The data is organized by the month they were listed for rent.
There are three data sets presented. The first is all rentals by month, the second is by housing type (detached/single family, townhome, apartment) and month, and the third is by zip code and month, presented in two separate graphs because the table was too long (email me if you’d like to see the data table).