DC Investments: New Builds vs. the Fixer Upper

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Congratulations! You’ve decided to invest in property in one of the fastest-growing markets in the country — Washington D.C.

Hailed for its historic charm, close proximity to the bustling city life, and picturesque backdrop, families and singles alike are flocking to the area. And so are property investors.

With so many historic buildings still in existence and new construction popping up every day, the question remains — what’s the better investment? New builds vs. the fixer-upper?

Both sides of the aisle have their pros and cons and we’ll explore them here.

Before you make a purchase, read on to learn more about the opportunities and pitfalls of investing in new builds vs. the fixer-upper.

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The Pros and Cons of Investing in New Builds

There’s nothing quite like a brand new home. The crisp, clean lines. Floors and appliances that have never been used. The smell.

DC Investments: New Builds vs. the Fixer Upper 7

But, sometimes, new builds come with their own sets of problems and headaches to look out for. Here, we’ll cover both.

Pros

Purchasing a brand new, move-in-ready home definitely offers some perks that you won’t find anywhere else.

Smooth Transition

When you invest in a new build, all the heavy lifting is done for you. Most new builds are move-in-ready. These homes are also known as turn-key because all that’s left for you to do is turn the key and enter!

You don’t have to worry about permits, inspections, scheduling contractors, or fixing leaky pipes or cracked floorboards. New builds are crisp, clean, and pristine.

Start Making Money Right Away

Since your new build investment is ready for inhabitants from day one, there’s no lag time between your purchase and finding tenants. In fact, you can market your property even before the closing date.

While you may not gain access to the building, you can show prospective renters floor plans and photos. This means lining up income the moment the sale is finalized

State of the Art Design and Technology

Although one attractive feature of living in Washington D.C. is the historic charm, some renters want the best of the best. New builds offer top of the line appliances, design elements, and technology.

This is ideal for young professionals and millennials looking to rent their first home. You won’t be dealing with outdated appliances, wallpaper, or carpet.

Most new builds are also equipped with tons of gadgets including intercom systems, cameras, and wireless capabilities. These added security features are perfect for families and retired couples looking for an added sense of security.

New builds often incorporate functional floor plans that withstand the test of time, creating a timeless layout.

Energy Efficient

In a world that’s increasingly eco-friendly, new builds are focused on using energy-efficient materials. Windows and insulation help keep the home cooler in the summer and warmer in the winter, lowering the electric bill and upkeep costs.

This amounts to thousands of dollars in savings over the course of your investment.

More Financing Options

Are you looking to invest but are struggling to secure funding? You’ll find you have more financing options when purchasing new builds vs. the fixer-upper.

That’s because banks and other lenders are more willing to spend money on a secure investment with minimal risk. New construction doesn’t carry the same level of risk as lending for a fixer-upper with hidden issues.

Keep in mind that other factors affect your ability to secure funding. Things like the amount of your down payment, your credit history, and income all play a role.

Prime Location

Most new builds are constructed where the action is. Downtown, in popular historic districts, or where other retail or industrial construction is taking place.

That means your new build is likely at the center of D.C. and exactly where prospective renters want to be. Find new builds in up-and-coming areas with close proximity to shopping and public transportation. 

Tenants with an active social life are more likely to rent near a bustling city with plenty of restaurants, activities, and parks. 

Cons

You might be thinking, “What could possibly go wrong with investing in a brand new construction?”.

It’s not so much a matter of things going wrong but instead about looking at the long-term impacts of buying new and deciding what’s more valuable — time or money.

Depreciation of Property Value

Similar to when you purchase a brand new car, the minute you drive it off the lot it automatically depreciates. The same is true for a new build.

The price always starts at the high end of the value scale and there’s no guarantee it’ll stay there. The best way to protect yourself against taking a major hit is by researching real estate market trends before making a purchase.

But remember, regardless of how much research you do, the market is unpredictable. Investing in new construction does come with a certain level of risk. 

Purchase Price

It’s no surprise that the purchase price of new construction is much higher than a fixer-upper. After all, you’re getting state of the art appliances, brand new flooring, paint, light fixtures, and everything in between.

Not only are you paying for these items but also peace of mind. For some investors, this is well worth the upgrade. 

Less Personality

Let’s face it. For construction companies to create new builds in a timely fashion, they tend to create cookie-cutter versions. Most units have the same light fixtures, countertops, cabinets, and appliances.

This makes it faster and cheaper for companies to produce new homes on a mass scale. And while this is an efficient way of doing business, it eliminates personality from the project.

When buying new builds vs. the fixer-upper you have minimal say over design elements. You get what you get and you don’t get upset.

Many investors don’t care too much about adding personality to the home. After all, you’re investing to rent it to someone else. It’s not really your home to personalize.

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Others prefer a say over the layout and other interior elements. If this describes you then you might be better suited for a fixer-upper. 

The Pros and Cons of Investing in a Fixer-Upper

Do you love a good DIY project? Do you have an eye for design that you want to utilize as part of your investment plan?

If so, a fixer-upper in D.C. might be the right choice for you. Here are some pros and cons of investing in a project rental in the D.C. area.

Pros

There’s no shortage of older homes in Washington D.C. that just needs a little TLC. Here are a few reasons to take advantage of a fixer-upper opportunity.

Lower Initial Cost

This is the main reason people invest in fix-uppers — it’s cheaper from the start. The initial price you’ll pay for a home is much lower than that of a new build.

Most homeowners selling a house in need of updates and repair prices it accordingly. That means you can score a home for below the current market value. 

Just keep in mind that depending on how much work needs to be done, you may have to wait a few months before renting out the property. Account for this lag time in your financial plan. 

Historical and Architectural Significance

One of the greatest appeals to renting, living, and investing in Washington D.C. is the historical significance and architectural beauty.

There’s something iconic and classic about an original D.C. home. They embody charm and personality that you’d be hard-pressed to find in a new build.

Some people looking to rent in D.C. are coming strictly for the historic significance. As an investor, you could benefit from purchasing a fixer-upper that embodies the classic, highly-sought-after D.C. charm and elegance.

Design Choices

When it comes to showing and marketing your rental property, you want it to be something you’re proud of. Does a new build feel too impersonal and sterile?

Fixer-uppers allow you to have direct involvement in the design process. You can add elements of personality and flare.

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In some cases, you can completely gut the home and create an entirely new look!

More Than a Financial Investment

Do you take pride in your work? Do you want a personal stake in your investment property?

Fixer-uppers give you the unique opportunity to roll your sleeves up and get your hands dirty. Helping perform renovations and transforming your rental property from something drab to something fab brings with it a certain sense of accomplishment. 

If you want to invest more than just your money into a rental property in Washington D.C., a fixer-upper gives you the chance to make a more personal contribution. 

Cons

While investing in a fixer-upper gives you a more personal stake in the home, it’s not without a price. Here are some cons to consider.

Repair and Renovation Costs

Although you’ll save on the initial price of a fixer-upper, you’ll ultimately spend a pretty penny performing repairs and renovations. This is one of the downsides of purchasing a fixer-upper project. 

Before you make the purchase, sit down and crunch numbers. Calculate the sale price of the home and the estimated cost of repairs. How much will you rent the home for?

Compare these figures to your overhead expenses to make sure you’ll come out financially ahead when the dust settles. 

It’s More Work

Aside from the financial cost of purchasing a fixer-upper, you’ll also need to put in a lot of time, effort, and sweat equity. 

If DIY projects and home renovation isn’t your thing, you may want to avoid purchasing a fixer-upper. While you can hire general contractors to perform these jobs for you, it’ll end up costing you even more in the long run.

Minor changes to the home like painting a few rooms or updating light fixtures might not be too bad. Homes that need major renovations like ripping up carpet and laying floors or remodeling an entire bathroom might not be worth your time.

Longer Wait for Tenants

Speaking of time. You won’t be able to rent your fixer-upper home until it’s, well, fixed! That means several months without any rental income.

Most investors are looking to make money right away. If you’re purchasing a fixer-upper in Washington D.C. for passive income or a side project, time may not be an issue for you.

Fixer-uppers are not ideal for those looking to make a quick buck or who want a fast turnaround.

Unwanted Surprises

Sometimes in life, surprises are a good thing. That’s not often the case when discussing buying a fixer-upper. 

The truth is, you never know what problems lie beneath. Even if the home passes the initial inspection, you may uncover more issues during the renovation process. This is one of the inherent risks of buying a home that needs upgrades.

You won’t know what’s behind the wall, under the floor, or lurking in the insulation until it’s too late. 

New Builds vs. the Fixer-Upper: The Great Investment Debate

Are you looking to invest in property in the D.C. area? If so, you have your choice of gorgeous and charming existing homes or new construction in many up-and-coming districts.

There are pros and cons to both sides of the equation. When choosing between new builds vs. the fixer-upper, it’s all about how much work, time, and money you’re willing to spend. 

If you don’t mind spending a little more upfront so that you have less worry long-term than a new build might be right for you.

On the other hand, if you don’t mind putting in the work and effort (and can’t imagine passing on an original D.C. home), then you’re likely prepared to tackle a fixer-upper project.

Whichever route you choose, investing in property in D.C. is a smart and lucrative decision. 

Need help managing your new property or finding the perfect rental? Our team of professionals can help.

Contact us today for more information!

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Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

Scroll down to learn more about Reports:

Navigate to the "Reports" module in your portal:

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Enhanced Rent Roll Report:

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Unit Comparison Report:

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Income Statement Month-Over-Month:

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Financial Statements

Financial statements will be published to your portal on a monthly basis. The statements are found in your Documents library, and provide a historical record of all financial performance. The statements serve as a snapshot of financial performance over a given period, and are static documents (unlike Reports, the statements do not update/change in real-time). 

Scroll down for more info about the Financial Statements in your Documents library:

The Documents area contains monthly financial statements:

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Download a statement to see month and YTD financials:

You'll also find a month-over-month operating statement:

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

  • The communications module will contain a record of all messages that you create through the portal. 

Click the "New Message" button and send your message:

Responses will show up in the conversation ticket:

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You can reply in-line using the comment box:

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Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

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The Description column displays the transaction type:

  • BILL: this is an expense transaction, such as for repair costs or management fees.
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  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

View a snapshot of income and expenses on your dashboard:

See every transaction in real-time on your ledger:

Statements and forms will be posted to your documents library:

View a suite of real-time financial reports:

See a running list of all bills, and drill down for more detail:

Under Bill Details, you'll find dates/descriptions/amounts and more:

You can also communicate with your Account Manager through the portal:

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.