How are you doing?

I saw this article today about compound interest and it got me thinking of a lot of people I know who just don't save any money- it is all about current consumption and not about understanding that we should be saving for our future. Many times it is simply because they don't even think there is a future, or somehow think they will make it big at some point, or maybe they just love what they do so much that it doesn't bother them to work forever. Or, and probably the most likely, is that they don't have much money to support their lifestyle and they refuse to lower their spending and don't give the consequences much thought. I'll just start next year... oh, I'll hit it big at some point..



But the magic of compounding interest just doesn't lie. If you invest $5k a year from age 25 to 35, you will have over 600k when you retire at 65, and that is if you never again invested a dollar (outside of reinvesting the money in the brokerage account, of course) for the rest of your life! That is less than $500 a month, for 5 years! $250 a paycheck people. Oftentimes you can do this with a tax deduction in your 401k or IRA. This isn't the post to go over Roth vs. 401k vs. traditional IRA strategies, but you get the gist.

Or, invest 5k until you hit 65 and retire with a cool $1.1 million. If you use the 4% rule you will have $40,000 a year pegged to inflation to retire on. But why stop there- 10% is the absolute minimum you should save per year. You need to pay yourself first. So, if you make 50k a year, $5,000 invested in a simple total market index fund will get you there in no time. But, if you are making 100k, you need to up the ante- your housing and food, etc are covered and you have more disposable income.

To live in Washington, DC you will need more money than almost any other city . It also means you should make a little more as well. This gives you, the person who lives here for his profession, but who will retire elsewhere, a huge advantage. Yes the cost to live in DC is more, but with a little effort, you can live a nice life while enjoying the extra money that you are going to get paid. The same job here makes more than the increase in the cost of living. Put in some really simple controls on your spending, and boom- early retirement.

That means you can max out your 401k much easier with a higher salary since your basic needs like food and shelter aren't way more expensive. Ok, they are way more expensive, but you are still coming out ahead.

So do the math. Get your savings to at least 20% of your salary. You will be able to retire much much earlier.. Or at least have a little F U money.. and in this town, you'll eventually need it. That's a promise.

Good and Bad: New 6th St Construction and What it Means

There's been a lot of development news on H St lately. Most of it is good news for those who have been waiting for what I call the 'dead area' to fill in.

The original revitalization plan for H St called for, yes, the streetcar. But before then, there also was a plan to get the bar and restaurant scene started on the eastern side of H. There was supposed to be housing and apartments on the western side, and retail in the middle.

Life and economics have a way of changing things and we saw that the east third thrived and the west side had things like Senate Square and then a few foundation restaurants like Boundary Road, Ethiopic, and others.. and then we started a little creep into the middle third with a sushi restaurant, etc.

Recently there has been the construction of new apartment buildings and a Giant on that western 1/3. Then we heard about new apartments going up on 6th, and yes, even a Whole Foods. The problem was that if you walked from Union Station to 12th, you would still pass shops with roll-ups (those ugly steel bars on the windows of local shops) and some seedy blocks. [I mean, what happened to the cute shop on 7th and H on the SE side? Pull those roll-ups down! It doesn't look good and people don't believe you are for real. I bet they go under in the next 6 months.]

I moved to the middle third a few years ago and kind of liked the grit-meets-new attitude, but always hated the old storage area and the strip mall. The Washington Business Journal is now touting the end of the old 6th at the heart of the dead zone, and trumping the new-look neighborhood. We have new apartments going up with retail on the ground floor, and it will look very very different than the old 6th St. Can you say CVS? Goodbye visits to scary Rite Aid.

This has a lot of good for H St and its NE denizens. Most of these new developments are for high-end Class A apartments- which will add much needed density to the area so we don't need to rely on bar and restaurant visitors from outer locales to visit to maintain. While we are promised the streetcar which should help a lot with both the attraction of potential renters and to bring in more foot traffic from Union Station; it also means we would be unhinged from the whole streetcar if the project doesn't pan out.

The good news for those who own: Your property values will skyrocket. Yes, it can be argued that the development of the neighborhood is already baked in- it really is baked in for retail and commercial properties. Most home buyers don't see potential unless it is right in front of their noses. People have a hard time moving somewhere that had a shooting a few weeks back. They want safety, an integrated community and a reasonable commute to their work.. Not to mention good schools.

The bad is some loss of original details- I mean Ben's Chili Bowl is cool and all, but the farce that they tore down the facade of an old building because it just wasn't safe is b.s. We all know it. But ok, I want you here, so I'm totally ok. Kinda.  You better make good and be a decent neighbor now, bamas.

So, here's my crystal ball- good double income no kid renters will move in, foot traffic will skyrocket, crime will go down (petty crime probably won't), and young couples will find that they can get a spot at a (for DC) reasonable price... although you might have to be crafty.

If nothing else, three supermarkets in a 7 block radius will make living here a much more attractive option. And if you live in Trinidad or a little further out, things could be a lot worse. If the streetcar really does hit its mark, the entire transformation of Benning will be quick to follow.

Now, I don't have rose colored glasses. A lot has to happen right. And the DC economy has to keep plugging along, including financing for these 55 million dollar apartments. We can expect schools to continue to improve. If not, you will see young couples buying and leaving after the kids are about to enter middle school- which is ok. I have a newborn, and I hope we can stay here for a long long time, but right now I just don't see the commitment after Elementary School.

I feel like we are kind of near the NY Brooklyn phneom- there are only so many row houses/brownstones. At some point you want to live in a certain proximity, and so it naturally makes a good spot if the rest of the population density around you skyrockets.

But, home ownership in itself does not a retirement make, and certainly can be one of the worst investments you could make, so don't look at this post and pay more than you can. If you do based on projected future value, you are a speculator, which means you are gambling. But, at the same time, if you could reasonably rent your spot that you buy for about 10% more than your mortgage, you are gold. Find a spot, like it, make it yours and if you decide to move you will not lose money and probably do ok.

Regardless, I like the new development and can't wait for the middle third Dead area to be something more alive and vibrant.

I've been a bit busy lately, but I hope to analyze a new house or two in the next week or two. Until then, Cap O will tweet ya at @CapitalwithanO

Oh, and check out Cusbah- probably my favorite restaurant on H St. wish I took a pic but.. they had a great deal going outside that I spied. "Buy two beers and pay for both happy hour". Ha. Keep it H.

And Toki- got takeout tonight. It was real. I always wonder if I should tip or not when I pick up. I usually do 10%, but figure I could do the same and get grubhub delivery... but it is so much fun hanging out at your spot that I still go just to hear how long the wait is and love that I can go home and eat without waiting...

On a lighter note: Toki! Toki!

I've already heard from friends off of H St. that this is a gamechanger.. well, at least for their taste buds.While I have taken for granted that I can skip the line and order take out from Toki (and other fine restaurants on H St), this is wonderful news for my friends away from H.

@TokiUnderground: Toki is now offering delivery anywhere in DC through Caviar! http://fb.me/2r3XjZSaz 

UPDATE AGAIN: Touching

While I normally would understand that some folks might have to grieve in their own way about a lost friend soldier  (apparently he threatened someone with a gun on Mother's Day), it would be nice that loved ones would understand the ramifications on the community when a shooting occurs near a school.

So, it is with mixed emotions for the bereaved as well as the community that I'm posting this and hoping that those putting up this memorial please stop with the obscenities. Do we really need our youngsters, who are already trying to understand why they were ushered into lockdown amid a murder, need to see F bombs on a poster, let alone wonder what 7th St. Bangers are? As I said, I understand that some grieve in their own way.. I'm just pointing out that there might be a better place than the street near an elementary school to post "Fat F*#$ing Dre" signs.

And what exactly are the 7th St. Bangers?

UPDATE: Man arrested in Morris Place Shooting

UPDATE UPDATE:  Washpo has more news about the whole mess

Dcist is reporting that the police arrested a man in the shooting last Friday near Ludlow Taylor Elementary. The neighborhood can sleep a bit easier, and I'm happy to see that the police have pledged to keep up the extra presence in the community. According to Commander Brown of the MPD:

This incident has raised valid concerns in the community and Ludlow Taylor School which is adjacent to the offense location.  I would like to assure all that the additional resources I have allocated for this area will not diminish with the closure of this case. 

I think we can all breathe a sigh of relief that they caught the alleged murderer and hats off to the police for acting quickly.

Commander Brown's full letter to the community:

Good afternoon,

As you are already aware, on Friday, April 25, 2014, a homicide occurred in the 600 block of Morris Place, Northeast.  Members of the Homicide Branch conducted an investigation and were able to obtain an arrest warrant for the suspect.  It is anticipated this individual will be in custody in the near future.

This incident has raised valid concerns in the community and Ludlow Taylor School which is adjacent to the offense location.  I would like to assure all that the additional resources I have allocated for this area will not diminish with the closure of this case.

Once finalized, I will provide the date for the PSA 104 community meeting.

Thank you.

Commander Jeff Brown

First District

101 M St SW

Washington DC 20024

Shooting on Morris Place near Ludlow Taylor Elem

There's nothing quite like waking up from a nap after hearing 5 sharp pops.. I didn't hear anyone scream so figured it was something from the school or construction. Apparently, it was gunshots and a man died. I saw a large African American man getting carted off.

I walked over there and they had found some shell casings, so hopefully they find who did it. The victim had what appeared to be a bullet hole in his head.. although it looked like it exited at the top of his head, which is a bit odd.

The block is usually really quiet, so it will be interesting to see what happened. Here's the crime scene.

G or NG? Inspire BBQ

G or NG?

Popville has the scoop on the closing of Inspire BBQ. Was Inspire Good or Not Good?

Answer:

Not Good. I ate at Inspire once when my wife brought it home for me.. I think I got sick from it. Regardless it tasted foul and I haven’t been back. The food was almost as bad as their twitter feed https://twitter.com/inspirebbq

(The social aspect of Inspire was Good.. I'm just talking about the food, people)

REQUIRED! Your home is a lousy investment.. until it is a good one. I'll explain later, but this is your one must read of the day.

Not Required but Fun:  I am a huge fan of porker fest:

Shot...

DC Streetcar by the numbers 

Chaser...

DC Streetcar by the numbers: 3 is the number of mayors who will have been elected before the streetcar actually opens.

Listing: It ain't your dad's 850k Cap Hill House. 1346 D St. NE

I have to admit, this one at 1346 13th St. NE seemed a bit unique from the pictures. Sure, it claimed to have a nice 2,249 sq foot floor plan, but we knew that was exaggerated, which I referenced in my previous post about how realtors screw with the apples to apples.  But, this appears to be quite the rehab. I love that when they pulled permits in January of this year that the notes just said they were, and this is verbatim "just moving round the bath room" I can't make this crap up.

As it turns out, this is really a 1,586 sq foot pad, but the listing is what I like to see- great pics, an honest look at whether the basement has a CofO (it does- I checked), and other than the sq foot shenanigans, looks like a lot of effort was put into the rehab. Now these pics are taken with a lens that makes it look MUCH bigger than it truly is, but I appreciate the effort to put its best foot forward. It's good to see that for 3% of $850k that the realtor took the time and effort to do it. Do the math... I know, right?

Great curb appeal. Look honey, they took the time to paint!

a good remodel

But what is going on here??

Ah, our first question.. what in the world is this about? It looks like the backyard is elevated. What's that about? Apparently, they decided to just put the backyard on top of the garage and build up the levels from the ground. Notice on the pics above that there isn't a window in the back of the kitchen, as is common with these row houses. That means they cut that window out, put in a garage (or rehabbed an existing one) and made a side exit. Now there is literally two staircases on the side of the house. 

The floor plan isn't for everyone, but it does maximize space

Pro's: Curb appeal. The layout could work given that this neighborhood is going to get pretty dense in the coming years. This will give you a nice garage space and let you have fun outside with elevation which should help with these pesky mosquitos. Good use of space. Potential rental income. 

Con's: It is really a $536 per sq foot price point if you compare apples to apples and don't include unfinished areas. Still, if you have $169,980 for a down payment and expenses (you probably don't if you are a first timer), this could be all yours.  Size- the photography probably is making this look much bigger than it really it. 

Realtors and prospective buyers- if you visit this one, drop the dime on its real feel in the comments.

My quick ballpark numbers puts this at about a $4,200 mortgage if you have the 20% down, which if you minus out the rental, isn't bad for some. Then again, the real estate tax man commeth to up this one a few 100k's in valuation.

Hidden Listing on H: 923 6th St NE

First, let's be real: if you are a Realtor and you can't take the time to show us inside photos, shame on you. I've seen too many lazy Realtors out there who just slap something together and call it a listing. Usually when all you see is the outside pics it means that the inside is fugly as all get-out. But I like those since that is about the best deal you can get anymore.

And this one is probably no different. The listing for 923 6th St. seems like an interesting property, but I can't tell without pics or an open house.. I do NOT feel like putting my time to visit a property unless the realtor has the sense to make me kinda, sorta want to see it.

That being said, this thing just dropped enough to get my attention. If you are a young couple (see my earlier post on the best way to do it in DC) and want to get into a house but not pay $1 mil, maybe an ugly rehab is for you. While some investors will do 600k in an all cash bid, generally you don't see it that much so you have a shot- and face it, most couples just can't see potential unless some flipper has put some gaudy backsplash in there and other lipstick.

This bad boy has 1,484 sq feet in the top 2 floors, and a decent space in the the basement of about 742 sq feet (although that's a guess since most basements have about what is on the floor above). The office of tax and revenue shows it doesn't have a CofO, so you might have to dig down to make that basement legal.

So, for a $404 sq ft price point plus a rental in the basement, it might make the cut. [SIDEBAR: Word to the wise: realtors are supposed to list sq foot as finished sq feet. Some do, some don't. So, if you make the basement a rental, it is still counted as unfinished for tax purposes no matter if it is technically finished.. so, if you DID finish this off, then for apples to apples you could say it was $269 per sq foot.. much better sounding, eh? Compare that to what is on the market, but be careful to make an apples to apples comparison. In a later post I will show you how shady realtors try to deceive people with a little sq foot trick.]

Let's run some quick numbers. Let's say I got it for $600,000 and put in $100,000 total for a rehab and got a 4.5% interest loan.These numbers are ballpark:

Down payment ~ $21k
Total mortgage ~ $579,000
$100,000 in Capital improvements brings the price per sq foot to about $539
Real Estate tax ~$320/mo
Monthly maintenance: $50
Insurance ~ $150/mo

Total expenses per month = $3,454 plus an additional mortgage insurance of at least $600... let's say total expenses are about 4k a month, give or take.

But, you get that basement rental up and running and turn it into a 1 bedroom and you get about $1,750. So, your nut is $2,250 and you can write off your property tax and interest every year. Plus, read my earlier post about refi'ing it once you get 80% /ltv

That is to say, if this place isn't a total gut and you can get that basement up to code and a redo of some of the living space so you can live there for the 100k. The Property Information Verification System (PIVS) site says it has forced air, so maybe you won't have to put that in, saving some moola.

Or the listing agent (get better pics, people!) knows he has a gut and is putting it out there for the investor class only... but then why bother to even write his description?

"Here s your chance to live near the vibrant H ST Corridor. 3 bdrm. .2 bth with a studio rental in the basement. Income producing property. Off street Parking for 2 cars. Walking distance to restaurants , grocery , metro, theaters, Union Station and so much more."

One smart way to buy a place in DC

As we have all heard- buying a place to live in DC is completely unreasonable and no one can afford it if they make a reasonable salary. But someone is bidding these homes up into the stratosphere, right?

The truth is, most of the people who want to move into a house in the H St. area are young couples who have kids or are about to start a family. Yet they can't find anything in their price range and so they can't move out of their $2,300 a month condo. Wait- someone can afford $2,300 a month in rent but still can't find a place in DC outside of plunking down way too much money for the honor of buying something in a shady area where the husband, let alone the wife, won't want to walk after dark. Awesome.

But, if that same couple just looked for a fixer upper that was a little too expensive for a flip job from an all-cash investor, and was a bit too ugly for a run of the mill single family home shopper, who could live for a few years where things weren't totally amazing inside, they might get a good deal. You could really find yourself with a great home that you would never be able to afford otherwise.

Here's the gig- find a house with a rental in it that will help cover the mortgage. Most houses that have it will have already been fixed up and so that rental income is already baked into the house's selling point. What you need is for one that is not done, and that can be gutted and built up. While you have the construction crew there you can also gut that nasty kitchen and the bathrooms, but live with the non-refinished wood and the ugly baseboards and maybe the layout for a few years while you build up equity.

Also- do it smart. Get an FHA loan. I know, it has mortgage insurance. So what, pay it for a year. Yep, you will have to pay $700 extra a month for a year, but you are getting 2k for that basement rental. So, your nut is only a bit more than the $2,300 you pay now. If you find a place that you can add value and do it for an FHA loan minimum down (3.5%), use the extra cash that you were going to put into a down payment, then the market will do the rest. You will have just forced appreciation into it at the same time as the market is making your place more expensive. Even if the house only goes up 3% in the next year, after you add on your forced appreciation from your rehab work you should be at 20% loan to value. (Remember, you are playing with big numbers here. 3% of $650,000 is $19.500).

Refi that sucker out to a conventional after a year which will drop the PMI and presto, you just made 17%. Wait a year more and get an appraisal and I bet you can pull some cash out from a credit line and redo those baseboards and the layout. Just sayin'

How do you do this you might ask? Well, you need some cash, or you could borrow from someone like your parents or your spouse's. The bottom line, after you drop 80-100k (including the down payment) into the place, you will have a 24k revenue stream coming in and your nut should be between $2,000-$2,700 depending on the interest rate from your loan and how big you went. I'll try to do the math for you in my next post.

Gardening in DC: Life lessons for April. Ouch

I made the mistake last weekend of actually planting my garden as well as doing some flower planting for my front yard. Actually, I am unsure of whether I made a mistake, but it does seem like I am flirting with disaster.

After spending about $100 on flowers, as well as trying to get more perennials in the ground so I don't have to spend $100 a year, things looked good. And then. Boom. Frost alert in DC. Here are these guys pissed off they are inside plastic after we were at 80 degrees earlier..

Now I think we have a micro-climate on the Hill, and I especially do because of all my brick in my backyard. My front yard is pretty much permashade though, at least after the leaves start to come in. So I try to get my sun intensive plants in high gear before the leaves come in in late May.. which sometimes aren't the best for frost. I covered these bad boys and I think I made it through.

The good news is that I didn't really plant much in my garden space other than some lettuce and other brassica type plants. I'll try to upload some photos, but things didn't look good so I took my seedlings inside. Hopefully, I'll have some good weather this weekend to get my cucumbers, toms and other stuff in, although I might wait on my toms until May.

Here are the little dudes now:

I took a class at the National Farmer Initiative  this winter and I really want to get started, so if there are any Cap Hill gardeners out there, let me know when you get your crops in. Right now my seedlings are going crazy in my cold frame!

Renting in DC- where and how much

I get a bunch of rentals that come my way, and I appreciate how hard it is for those looking for a new spot in DC. I remember when I moved here and didn't know one community from another and wasn't sure where the heck I was, let alone where I should live. It would have been helpful for someone to give a bit of a background on the rents and what someone could get for a reasonable price.

So, here you go. This town sucks for renters. And owners, although that will be in a future post. For renters, be prepared to pay a premium to live downtown. 

I've lived in Cleveland Park, Capitol Hill and Chinatown. I liked living in a Chinatown condo since it had a pool, but those rents are now at least $2,400 for a single, and trending way upwards. Cap Hill was neat since you got a back yard and your own grill.. but some areas are too crazy.  Dupont? Forget it unless you have money to burn and don't want to retire.. Like ever. 

Your goal (IMHO) should be to live with some cool people and try not to rack up the debt so that once you find a job that pays a livable wage you won't have to start paying down 20k in credit card bills.. Or for the usual route- you will be here for 2 years and then figure out that politics/policy/lobbying/campaigning isn't for you long-term..  so don't go home with your head down and with a ton of debt. Go home with your DC stripes, a ton of experience and with a lot more wisdom and money in your pocket.

If you are like me, try to find some edgy areas like Petsworth (the new Columbia Heights), Cap Hill or H St. NE. But, remember- rent is negotiable! I went to a broker and found a condo that had been on the market for nearly 6 months and offered $1,500 a month. After negotiating I got it for $1,600, which was down from the asking price of $2,100. Now, that was on my second stint in DC and I was married with a good job, so it isn't for everyone. But, if you love a spot, offer a little more to secure it. If it has been on the market for a while, try to negotiate down. 

The thing I did when I first moved here was move into a group house. 5 people, 3 of one sex, 2 of the other. It was fun, and I met a lot of people I am still friends with today. You can still do that and get away with $800 or so a month. Try your best to be at least about 15 minutes to a metro or a decent bus line. You really need to try to not use Uber  (get $20 bucks free by clicking on that link) more than a few times a month (or not at all). H St. will (SOMEDAY) have a trolley and the X2 is a cheap and direct link to downtown, although it can be..ahem.. interesting.

If you do want a one bedroom- be prepared to pay at least $1,500 or so. My buddy listed his yesterday for $1,675, and it is in a dope little area around where I live on H St. Consider it Cap'n O endorsed.

Honestly, there isn't a great place to find good group houses anymore except Craigslist.. maybe I'm wrong since I haven't really looked lately, so leave some sites in the comments if you know of any. 

New Condo Debate on the Hill and other Biz- 1511 A St. NE

It's been a really fun day in the Capitol Hill area- there's been a ton of news about comings and goings, as well as some situations that some would have you believe only have one side to the coin. 

Here's a fun one: A Washington Post headline screams Under zoning code, few restrictions on what can be built on NE property and has some pictures of a clearly well-off homeowner worrying about a new condo coming to the street at 1511 A St. NE. A quick read would have you think that this is a tragedy.

The summary is that an old home (it is not historic, no matter how many people use the term- it is just old and not in the historic district) is being turned into a bunch of condos. I know, it doesn't look right- this is a street with old row houses and a charming character. But, as someone who almost was priced out of the area, I can tell you that friends of mine would love more condos and housing stock to get on the market for under 400k and $466 a square foot. Seriously.. 

While I see the merits of both sides, and certainly would be upset if a condo building was build right next to me- wait, that is exactly what happened behind my house- I understand that if I want my property value to skyrocket, I have to accept a denser neighborhood... with all sorts of people. Trust me, it is more fun that way anyway.

I'm a fan of old world Capitol Hill, but I'm also a fan of new buildings, more people in the area and the restaurants and bells and whistles that come with it, although the design of this particular building kind of sucks. After all, would we see the development of H St. without all the apartment buildings and housing coming on line? I mean, it can't be the mere promise of the street car, right? The NY Times thinks so. 

Some other links I like for the area:

New Steak joint? Yes please. Gimme my bernaise. Mythology Modern Chop House and Lore Lounge coming to H Street NE next year

Meh. This one just jumps out at me as a commercial property owner hoping for the best with no real plan.  Potential Huge Transformation for Former Church on H Street, NE

Taylor's apparently can't figure out what city they are in.. Philly or NY? I'd rather have the cheese steaks. Or at least Chicago style. 

Well there you go. First post.