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What You Need to Know About Flipping a House in Washington, D.C.

Across the District of Columbia metro area, investors are purchasing property, renovating it and then selling it for a profit -- otherwise known as house flipping.

Good "flips" can occur in almost any neighborhood in the District of Columbia, and in fact are happening all over town, says Kimberly Cestari of W.C. & A.N. Miller Realtors, a Long & Foster Company. "It's all about buying low and selling high. Locations near public transit are desirable, and converting single-family [property] that is zoned for multifamily is very profitable," she says.

Top District real estate agents identified by OpenHouse Realty, an agent referral company (and a U.S. News partner), offer some important advice on how the investors of flips -- as well as the buyers of flipped properties -- should approach these types of projects.

[Read: 5 Real Estate Trends to Know Before Selling Your Washington, D.C., Home.]

Where it's taking place: All over the metro area, says Ty Voyles, a founding principal of Fulcrum Properties Group. "Various investors focus on different areas, depending on their expertise and knowledge of the market."

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Most house flips are occurring in the District itself or in areas close to it, says Kevin Wood, a Realtor with Slate Properties. These include Maryland neighborhoods like Silver Spring, Mount Rainier and Hyattsville, and in Virginia, Arlington and parts of Alexandria, he says.

"D.C.'s population is growing by about a thousand a month," a trend that's been happening for a decade, Wood says. He also notes that, with so many people moving into the city, many of whom are millennials looking for close proximity to hip bars and restaurants, a lot of these renovations are taking place near Metro stops.

A lot of activity is on Capitol Hill and surrounding neighborhoods like Eckington, Trinidad, Shaw and Bloomingdale. Renovations are also popular in historic Anacostia, Brookland and Riggs Park, a neighborhood near Takoma Park, Maryland. These are often the scenes of "full gut" renovations, which involve changing all underlying systems, and possibly even some structural components of a house. "I see many flippers doing a basement dig out or an underpinning of a basement to get more ceiling height and make it a much more livable space," Voyles says.

Types of properties getting flipped: The District of Columbia is a city of row houses located in older neighborhoods, so it's not surprising that many of the house flips involve single-family row houses.

Some involve conversions of these homes into two-unit condominiums. "We're seeing more condo conversions in the Northwest areas: Columbia Heights, Adams Morgan, Kalorama, Dupont Circle and Logan Circle," Voyles says.

There's a lot of value in taking a row house and converting it into several condos that share a common stairway. Typically, an investor will buy a row house that hasn't been touched in 60 years for $500,000, turn it into condos and sell each in the $650,000 to $950,000 range, Wood says.

Plenty of quality flips are taking place in the District of Columbia area. But Cestari says she's also seen lots of poor construction on these projects. Those considering flipping a property "need to be cognizant of the product they eventually present to the public to buy, as it will affect their reputation for those who want to stay in the business and not be a one-product flipper," she notes. "Buyers of the flip, on the other hand, need to be aware of what they are purchasing."

If you're flipping:

Do the math. To ensure that the profit margin is there to make a transaction worthwhile, it's prudent to know the numbers behind the acquisition, construction, sales and marketing costs of a flip, Voyles emphasizes.

[Read: 10 Up-and-Coming Washington, D.C., Neighborhoods to Buy a Home.]

One common mistake Voyles sees is when an investor pays too much up front for a property, then subsequently does a bad job on the renovation and sells it to an unsuspecting buyer. "Or, they overestimate post-construction value and end up breaking even at best, or taking a substantial loss," he says.

To avoid these scenarios, work with someone who knows the market really well. " A good Realtor is going to know what a house flip is worth and how much different finishes are going to be worth," and what you can sell the house for on the back end, Voyles advises.

Know the law. "D.C. actually has pretty strict permitting laws on performing construction on a property," Voyles says. Know what they require before you do a house flip.

Timing is everything. Once you renovate your home and it's ready for sale, Wood recommends waiting until spring or fall to list the property.

"You don't want to deliver it in January or February," he says, noting that winter and summer are times when sales figures are lowest. Flippers who list in January or July run the risk of watching their beautifully renovated house or condo sit on the market for several months.

"If the busy season isn't until April or May, buyers will think something's wrong with it, because it's been on market for too long," Wood warns.

If you're buying a flip:

Research the builder. Some flippers will buy a property under the name of a limited liability company in order to limit their ability to get sued. "There has been a pretty well-publicized trend of really low-grade flips done in D.C. in the past three to five years," Voyles says.

For this reason, "it's a good idea to find out from the listing agent who the builder is, how many projects they've done, how long they've been in the business, what is their reputation, and are there any Better Business Bureau claims against them," Cestari says.

Look for red flags. Buyers of a flip who don't have a keen eye for details should ask their real estate agent and home inspector to look for any red flags, Cestari says. Were permits required and were they pulled for the job based on the extent of the flip? Find out if the builder is on file at the District of Columbia's Department of Consumer and Regulatory Affairs, an agency that regulates businesses and issues business licenses.

[Read: A First-Time Buyer's Guide to Washington, D.C.]

Look closely at the details. Are the finishes complete and of good quality? Does the trim work have nice edges? "If there is quality on the outside of the walls, then there is most likely quality in what you can't see," Cestari says.

Also, check to make sure all electrical, structural and plumbing inspections received a final sign off by the city inspector.

Looking for a real estate agent in Washington, D.C.? Our Find an Agent tool can match you with the person who's most qualified for the job.



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