Aerial View of Alexandria, Virginia. Photo from iStock.com/said elmobasher
From a quick look, Alexandria, Virginia, is a perfect location to begin a rental investment business. There are many ideal financial reasons Alexandria makes a lot of common sense, but if you examine the details of your budget and a return on investment analysis, investing in an Alexandria rental home may not be the best decision, especially for a first-time investment property buyer.
Pros for Investing in Alexandria's Rental Market
The suburbs surrounding Washington, DC, handle real estate and economic fluctuations more successfully than much of the U.S. This predictability holds true for much of Northern Virginia, specifically Alexandria.
Stability and wealth are, of course, tied to the federal government and its far-reaching resources:
- Efficient public transportation in and out of Washington, DC, and nearby cities in Maryland and Virginia allows renters to easily access work in the city.
- The military has a strong presence. Not only does it operate out of the Pentagon, but servicemembers relocate to every part of the City of Alexandria and Alexandria, Fairfax County, to work at Fort Belvoir, Joint Base Anacostia-Bolling, and Fort McNair.
- Academia flourishes throughout the region. From major universities to the Alexandria campus of Northern Virginia Community College, students and college staff hunt for single and multi-family homes to rent.
- The region is affluent and transient. Publications like Forbes and U.S. News & World Reports regularly rank Fairfax County as one of the wealthiest counties in America. This means a constant stream of renters who can afford the prices of an Alexandria rental are searching for housing.
View of Old Town Alexandria from the Potomac. Photo from iStock.com/amedved
Cons for Investing in Alexandria's Rental Market
Although Alexandria's real estate remains steady during turbulent financial periods, this can make affordable real estate deals challenging.
- Creating positive cash flow from a rental purchase is often difficult unless you invest cash in the initial purchase deal.
- Finding an affordable rental to buy is increasingly difficult for first-time investors. Scarcity and overinflated home prices are the main obstacles.
- Everyday investors compete with foreign investment firms that purchase large swaths of property to rent to incoming Amazonians and the follow-on industries involved with the arrival of H2Q. Finding a multi-family rental to buy is proving to be even more difficult.
Photo from Canva
Where to Find Affordable Investment Rentals in Alexandria
For investors looking to buy properties in Alexandria near the $600,000 price point, Redfin reports that there are still a few pockets in Alexandria where this is a possibility. These zip codes are all located in Fairfax County.
Median Home Value:
- 22306 Hybla Valley, $642,000
- 22309 Groveton, $595,000
- 22310 Rose Hill, $630,000
A major initiative occurring just miles away on Route 1 will directly impact all three of these areas. Embark Richmond Highway is an approved initiative suggesting significant corridor changes. From street widening to building additional affordable housing and the ultimate extension of the Yellow Metro line, this area is ripe for the positives and negatives that occur with modernization.
Expect these changes to affect one of the top criteria for making a wise rental home purchase decision: the quality of public education zoned for your property. Fairfax County is widely known for operating one of the best school systems in the country. However, the schools along the Route 1 corridor typically face issues from overcrowding and serving student populations with economic challenges. As Embark progresses, the hope is that these issues will be tempered, but the influx of new families looking for affordable housing will potentially strain classroom sizes further.
Old Town Alexandria. Photo from iStock.com/jim Schlett
Calculating Beyond the Mortgage and the Rent
Alexandria rental home investors have their work cut out for them to be successful. The simple math of charging more for rent than your mortgage payment won’t show the entire picture. Calculating correct cash flow is critical to the entire purchase, considering the striking amount of property taxes that are normal for Fairfax County and the City of Alexandria. That’s just the beginning; mortgage interest, depreciation, and operating expenses are also part of the equation.
Each investor has a reason for purchasing a rental property. Whether to earn a passive income or to secure a home to return to years later, each situation is nuanced and specific. The first crucial step is determining the precise numbers needed to make an Alexandria rental business successful. Before committing to the process, potential buyers should prepare to dissect and confer with experienced accounting and real estate professionals.
