A New Trend: Commuting from Richmond to DC for Work with Guest Mimi Montgomery

Housing affordability in the Washington DC metro area has been and continues to be challenging for many people, and though it’s not a new concept to commute into a city for work, the pandemic has made this a trending topic and consideration, especially in the DMV. In this episode, Alison is joined by Mimi Montgomery, the Home & Features Editor at Washingtonian Magazine who recently researched and penned an article about DC area home buyers moving to Richmond, VA for more affordable housing and a lower cost of living. In this episode, they discuss the findings of Mimi’s research and point out some of the potential concerns when considering a 2+ hour move from the place where your job is located.

Subscribe to our show and feel free to reach out to us on The RARE website or directly to Alison with comments and questions: www.theRAREdc.com | alison@theraredc.com IG: @theraredc and Mimi Montgomery Twitter: @mimi_montgom | mmontgomery@washingtonian.com

Hello everyone welcome back Mimi thank0:02you so much for being my guest today0:04thank you for having me actually thank0:07you for being my guest again I should0:08say because uh you were a guest way0:11early on like when I had a co-host0:15um yeah I think it was early 2020 right0:18before or right as the pandemic was0:20happening so yeah yeah slightly0:22different kind of uh time of year now0:26um so today so you have been covering0:30um a wide range of topics in the DMV0:33housing related topics for over five0:35years0:36um and obviously as I just said it0:38they've been both pre-pandemic and post0:42um and you recently penned an article0:43the exact title is is Richmond turning0:46into the new bedroom community for DC0:49workers it was published in the0:51Washingtonian and uh you know you and I0:54talked and thought that this might be an0:55interesting topic to talk about which is0:57you know potentially more than just0:59Richmond but we will focus on it today1:01but commuting into DC1:04um because of you know we're going to1:06get into the reasons but commuting into1:07DC and not really living here1:10um so thank you for coming on and uh1:13talking about this with us today1:15yeah thank you so much for having me1:17again1:18um it's it's a very interesting topic1:21and I think really you know says a lot1:23about the way people are living and1:25working today yeah and you know and I1:27also say before really get into it that1:30um you know anecdotally as a real estate1:31agent or as real estate agents in1:33general we are dealing with um it's not1:36that we don't do research but it's more1:38based on numbers it's based on stats1:40potentially but you are really going in1:42and doing research and speaking to1:44people post pre-post kind of1:47transactions you're getting lots of1:49different opinions not just from one1:51brokerage so I really appreciate reading1:54your articles when you you know I know1:56that there's research behind it you're1:58I'm sure you're going to mention how you2:00got the statistics that you got for this2:01article so it's um it's it's a different2:04take on some of these real estate Trends2:06and things that are happening2:08um so today obviously2:10um when we're talking about Richmond2:13you know I I knew that this may be2:15happening but not to the degree that2:17that you reported on yeah yeah yeah2:20definitely it seems like it's it's a big2:23a big thing that's happening you know2:24more so compared to previous years for2:26sure yeah so like before we again keep2:29going into Richmond like something2:31that's been this is not like a New2:33Concept right like people have been2:35doing this for decades like my dad I2:38grew up in Albany New York my dad2:40occasionally had to go to New York City2:41again occasionally but he had to go to2:43New York City it was it's a two and a2:45half hour drive2:46or train ride luckily the train is I2:49think because Albany is the capital the2:51train was running regularly it was very2:54predictable driving to New York City as2:57a whole thing2:58um so you know he did that3:01um and if he had to go down once a week3:02for example I think we still would have3:04lived around the Albany area because it3:06would have made sense for for multiple3:08reasons3:09um and I know people who have done that3:10from like the Philly area3:12um or people who drive but you can take3:15the train depending on where you are in3:16New Jersey so it's not that this content3:19this concept is new it's that I in3:22particular with Richmond I don't think3:24it's uh an A to B that I would have3:27really put together right so3:30um so anyway3:32um and I don't know anywhere on the west3:33coast where this happens it seems maybe3:34to be like a mainly east coast thing but3:36uh so you know why don't we just start3:39talking a little bit about the what you3:41found out and how this article started3:43and uh yeah we'll take it from there3:46yeah totally well I I have to give a3:48shout out to axios Richmond because I3:51first heard about this because they had3:52reported on some of the data that I3:54ended up looking at3:55um so the University of Virginia3:58um you know did some research and they4:00found that4:02um there was a 36 increase in the4:05average number of Northern Virginia4:07transplants to Richmond4:09um in between 2020 and 21 21 compared to4:13in years past4:16um and at the same time you know4:18ridership uh via the train between DC4:21and Richmond had increased during covid4:24um and Richmond areas population grew4:27faster than Northern Virginia's for it4:29for two years in a row which was the4:31first time that that had happened since4:32they had been4:34um tracking this data4:36um so you know there were there were4:37these numbers like pointing to this4:38happening and to your point sure this4:40isn't a new thing like of course people4:41have lived in Richmond and you know4:43worked for dc-based companies before but4:46it seems like you know due to the4:49prevalence of remote and hybrid work now4:51like more people are taking advantage of4:54this than previously just because4:56they're able to4:58um4:58and you know so the the numbers sort of5:01skyrocketed during during covet and so I5:03you know I had the data and but then I5:06needed to sort of like get the color and5:08the anecdotes so I reached out to some5:11Richmond agents to see if you know what5:14the numbers were saying sort of lined up5:16with what they were saying and they were5:17like yeah this is like an explosion and5:20this trend uh you know during covid tons5:23of people coming down from Northern5:25Virginia and what's interesting is one5:27of them told me is that5:29um5:30she saw it was people who had no5:33connection to Richmond coming down here5:34whereas before she was like I would get5:36a lot of Northern Virginia people who5:38you know maybe had a kid that went to5:39VCU in Richmond or like had family in5:41Richmond and finally were you know5:43making the move down there but she was5:44like now it's just people who really5:47want the the lower cost of living or you5:50know the lower cost of property in5:52Richmond and are coming down here5:53because you know now they only have to5:55be in the office5:56you know once a week or once a month or5:59maybe never and so you know whereas6:02before they wouldn't ever have thought6:04about moving there because they had6:06these dc-based jobs now it's like an6:08option for them6:09um yeah so and then I talked to a couple6:11people who who made the move themselves6:13and were doing it for exactly those6:14reasons6:15um you know lower cost of living6:18um and more space more bang for their6:20Buck6:21um and yeah I mean it's definitely it's6:24definitely a thing that's happening6:26yeah I'm curious so how many people did6:28you talk to who did the move um in this6:30article I can't remember is it like6:31three or five I talked to three yes6:34um and so they what the agents told me6:38is that most of the people that they're6:39seeing doing this are either first-time6:41buyers or people like young families who6:44like need more space and it's just6:46really expensive to get that here6:49um I think the the average uh sales6:51price for a house in the DC area is like6:54200 000 more than it is in Richmond6:58um and you know one big thing that like7:01this is sort of like an anecdotal thing7:02that I found that you know necessarily7:04wouldn't have been like reflected in7:05data is that the reason why so many of7:08these Northern Virginia people are7:10looking to Richmond as opposed to just7:12like looking out further like to a loud7:14and County where you know on the7:16outskirts where you can get cheaper7:18housing is because you know they can7:20still have like a lot of the amenities7:21that they like about Northern Virginia7:23in Richmond right like you know they can7:25walk to to restaurants walk to bars like7:29there's concerts there's plays one woman7:31I spoke with was like we really told our7:34agent that we wanted to be able to walk7:35to breweries from our house like that7:36was like really important to them and7:38it's like something that I guess they7:40could do in their house in Alexandria7:41and they can still do that in Richmond7:42you know whereas if you move out to like7:44Round Hill Virginia like you can't7:46really you're not walking to like a bar7:47out there7:49um so it's like you know the trappings7:51of an urban life you know the kind of7:53life that they have here in Northern7:54Virginia7:56um but it's just like you know7:57significantly cheaper in Richmond yeah I8:00mean I've talked about on the show and I8:02know you've reported on the fact that8:04people have uh especially in the first8:07year of the pandemic they bought houses8:09more like Mountain Homes or places on a8:12lake places that are kind of more8:13vacation homey8:15um as a place to go and work because8:18they again didn't have to be in the8:20office but that's a completely different8:23feel and not what we're talking about8:24here because this is like literally City8:26to city and yes Richmond sound is big8:29and potentially doesn't have quite as8:31much but yeah I mean it's kind of small8:34City living which is kind of funny8:35because I feel like everybody says DC is8:37a small city which yeah whatever there's8:39not just big yeah right like yeah New8:41York's huge and DC's you know medium or8:44whatever but um but yeah so it's it is8:47interesting because8:49if I'm being totally honest when I first8:51read when I first read your article I8:52was like like I I'm a city girl like I8:55don't want to live in Richmond but then8:56I thought about how like now again it8:59was probably five years ago so it's9:00definitely pre-pandemic and a couple9:02years before that but my friend and I9:04drove down to Richmond because we wanted9:06to look at all the street art there's a9:07ton of art there was at the I can't9:10remember the name of the the museum9:12there they've got to really grow amazing9:14Museum yeah yeah and they had an amazing9:17um exhibit that we really wanted to see9:19and then a year after that there was a9:22concert I wanted to see so I drove down9:24for the night saw the concert and drove9:27back you know pretty intense amount of9:29driving but still like it's you know but9:32it my point is more that they have those9:33things there9:35um maybe not to the greater degree but9:38it's interesting because you're talking9:39about Northern Virginia a lot of the9:41time and while you're speaking versus DC9:43and if you live in like Old Town it's9:46kind of like a mini City in a city and I9:48can see how the the you know going from9:50Old Town to Richmond or some areas of9:53Northern Virginia is really an easy9:56transition9:57yeah totally yeah and two and like going10:00off of that10:01um I asked some of the agents this I was10:03like you know are you seeing mostly10:05people from Virginia DC Maryland and10:08they were like not Maryland really it's10:10mostly either DC proper or Northern10:12Virginia just because I guess like the10:15thought of you know if you're in10:17Maryland I guess people just want to you10:19know continue going north and maybe move10:20further out into the Maryland burbs I10:22you know there's no really data to sort10:24of speak to that but it is interesting10:25it seems to be mostly like for the10:26Virginia folks in DC yeah well or if10:29you're already in if you're a city10:31person and you're already living in10:33Maryland or you know you're close to DC10:35from that angle maybe you're considering10:37Baltimore10:38um yeah and Baltimore has a really10:40really predictable great train that runs10:43in between the mark train so we're going10:46to get into the cons in a second10:47potentially of being in Richmond but10:50that's certainly a pro of doing the10:52Baltimore DC connection and even10:55Baltimore I mean this I know because I10:57really love Baltimore our Baltimore seen10:58an uptick in their prices too because I11:01would assume because of some of what11:03we're talking about right now the cost11:06of living is just tremendously lower and11:08Baltimore is another really big city11:09that has a robust you know entertainment11:11scene restaurant scene11:13et cetera et cetera lots of universities11:14there11:16um so so yeah11:18um okay so I do think it's important for11:20us to talk about11:22the pitfalls potentially I guess that11:25could exist here11:27um and because I mean at the end of the11:29day Richmond is I think they say just11:31over two hours south of here right11:34the world depends on traffic of course11:37but okay so let's talk about that11:39so well well first let's talk about11:41public transportation so public11:42transportation they do have a train you11:45know Amtrak does run11:47um and you know I hear that there's11:49going to be a high-speed service though11:50I don't know what the timeline is of11:52that but I mean everything everything11:54involving any kind of construction is11:56never on time so whatever it is it's not11:58it's not right now when we're talking12:00about this increase in uh people moving12:03to Richmond so you know the Amtrak12:05exists and um I was like well what12:08before we recorded this episode I wanted12:10to see like what kind of cost that would12:11add right so if you're going let's just12:14even say once a week then Amtrak is 5012:18round trip at its cheapest so that's12:20like the lowest level seat after 2412:23hours you know no refund kind of thing12:26so maybe you're supposed to be on a12:27Thursday you buy your your you know trip12:30the week in advance and then they decide12:31you've got to be there on Friday you're12:33losing that fifty dollars so but let's12:34assume it always goes to plan and then12:37you've got to park your car because12:38you're almost definitely going to have a12:39car12:40when you're living in Richmond and maybe12:42you have it as a backup in case you12:44can't take the train and that's ten12:46dollars a day parking when you're at the12:47train station so that's 240 a month12:51which if we start talking about12:52different areas so let's back up for two12:55seconds you said the the average price12:57of a house in DC versus Richmond there's12:59like a 200 000 difference I would say13:02that you know they're averaging all of13:04the different areas of DC so depending13:06on where you're looking you know and if13:08you were in like Northern Virginia then13:10that's got to be you know like Clarendon13:12or Arlington and Alexandria in general I13:15would I would argue that it's well13:16beyond that13:18um and the and the difference in13:20mortgage payments of course13:21would be astronomically different now if13:23people are buying now just because of13:24interest rates blah blah blah we won't13:26get into that but anyway 240 a month13:28isn't nothing and that's if you're only13:30going in once a week and I know plenty13:32of people who are going in twice a week13:34to the office right so now we're up to13:37you know 50013:39um which you know sure maybe it's a13:42write-off if that's how you do your13:43taxes and stuff like that we did an13:45episode on taxes recently we could pull13:46Ted back in and ask him but you know so13:48so at the end of the day13:51that's not cheap I would say sure yeah13:54totally and I mean like to your point I13:56think that's like something that people13:57will have to factor in it's like are you13:59going to take the train I think I think14:00depending on the day you can get like a14:02one-way ticket there for like 15 bucks14:04but I think that's like if you time it14:05like really you know well14:08um or are you going to like sit in 9514:11traffic which I mean like I have made14:14the drive to Richmond a lot of times14:15before I live in Alexandria if you time14:16it right from Alexandria you can get14:18there like in an hour and 40 but you're14:20like waking up at the crack of dawn14:21otherwise you know people who have made14:24that drive know the Fredericksburg like14:26fiery Inferno it just like takes your14:29soul out of your body every time you14:30like hit that like standstill traffic14:34um so I or you know you could like spend14:36well up to like three hours each way in14:38the car maybe even more if there's14:39really bad traffic14:41um but you know so I one of the women I14:43interviewed who uh purchased home in14:45Richmond like you know she will have to14:47come into Alexandria for her job she14:50said like once a week and like I asked14:52her I was like you know have you thought14:53about like you know your commute and14:55she's like yeah she's like I'm gonna try14:57to I'm gonna try to drive I'm gonna try14:59to train but she's like the one of the15:02great things about you know the sort of15:04this new normal that we're in is I think15:05that people's working hours are like a15:07little bit more flexible you know know15:09I've even noticed this my own job it's15:10like no longer like you have to be there15:13until five on the days during the office15:14like people get it like if you want to15:16leave at 3 30 now to like be traffic so15:17I think you know she's hoping for like a15:19bit more flexibility in her day that way15:21and also she was like honestly it's15:24worth it for to be able to like afford a15:27house like the kind of house that I want15:28and the kind of area that I want with15:30like the kind of like trappings and15:31amenities she's like it's worth it to15:33get a foot in the door you know building15:35that kind of like wealth and whatnot for15:37having to drive to Alexandria like once15:39a week so yeah yeah15:42um I was you said something interesting15:44the building the wealth and something I15:46didn't look into is you know are you15:48going to you're probably not going to15:49build your Equity as fast and judgment15:53as you are here15:55um it's very hard to plan for what15:57Equity you'll have in a house right15:58because you just don't know what will15:59happen the house and the economy and16:00blah blah blah blah but yeah I mean16:03how's buying a house and having Equity16:05is buying a house and having having16:06Equity it's generally a positive thing16:08regardless uh okay so back to the the16:11maybe cons depending on how you look at16:14it I mean yeah maybe you don't mind16:15sitting in the car for six hours a day16:16you're listening to this podcast of16:18course you're listening you're listening16:19to podcasts or it's your time to relax16:22you know you are really just like zoning16:24out listening to music okay16:27um16:27but yeah 95 is awful uh so then there's16:31also16:32you know there's there's some social16:35social things I think that start to come16:37into this which is16:38you're starting to change the dynamic of16:41a city when you when DC Maryland or not16:43Maryland DC Northern Virginia buyers are16:46going down there and kind of scooping up16:48I think people might say the properties16:50down there16:52um the question is you know what is that16:54doing to the local economy what is that16:57doing to the feel of the city you know17:00like I could see how people might be17:03a little resentful of people coming in17:06from other places and increasing17:09property values because the competition17:10is now getting higher17:13um and people who you know maybe it's17:15not once a week maybe it's three times a17:16week they're going to the city17:18um and they're not there they're not17:20really participating in the in the city17:23so much17:24um so17:26I don't know did anybody speak to that17:28because I always think about those17:29things yeah and I think that's like a17:32really important and Fair Point17:34um so the the Agents of course you know17:38we're like pretty positive about the17:39trend overall17:41um but you know they they did you know17:44admit that there there is definitely the17:47definite like issue of jacking up prices17:49in Richmond because you have people17:50coming from a more expensive area who17:52you know if they've owned a home might17:53be coming in before buying power17:55um or just you know more demand17:57increases you know prices in Richmond in17:59general18:00um so that's definitely like you know an18:02issue to think about18:03um and then there's the whole sort of18:05like just basic18:06social aspect of it right like there18:09were these bumper stickers I don't know18:10if people still have them but I know at18:11one point they were a thing that said18:13don't Nova my RVA and people like in18:16Richmond had them in on their bumper18:19stickers you know basically being like18:20stay out of our city18:23um and so you know I think there are18:24probably some people that would not be18:26like super happy about this I actually18:27got a text message from one of my18:29friends who is from Richmond and he18:31lives in Richmond and he was like I just18:32saw your article and he was like he was18:35like please don't like have all these18:37people read it and start moving down he18:39was like we already have like seen like18:40a huge increase in on people coming here18:43from kobit not he said not just from DC18:46from other cities as well and like18:47jacking up prices and gobbling up the18:49real estate so I definitely think that18:50there are some people who probably would18:52be you know adverse to seeing this trend18:54play out more18:56um but then again of course I'm sure18:57that there are people who are like happy18:58to have you know more folks moving into19:00the area uh frequenting more restaurants19:02and you know businesses and all that19:04good stuff19:06um19:06but yeah and then let's also you have to19:08think about things like you know a lot19:10of the things that people are excited to19:12maybe leave behind in Northern Virginia19:13like you know higher prices just for19:16cost of living stuff or like traffic you19:19know that could end up trickling down to19:21Richmond if more and more folks start19:23moving there you know so at what point19:25does does it sort of like start the tide19:27starts to rise and it sort of like19:29matches a lot of those things about19:30Northern Virginia19:32um yeah to I mean to your point about19:34the traffic before and leaving at Good19:35Times well if you've got more people who19:38are leaving at Good Times you know it's19:40going to increase traffic all the time19:41and I've noticed that you know like19:44um you were saying that since covid has19:46happened since the pandemic happened19:48people have a little bit more leeway and19:50when they leave work19:52and you know I have been in real estate19:54for close to a decade and so I obviously19:56do a lot of showings and I used to time19:58my showing so that we were I was if it20:01was in Maryland or Virginia I was20:02leaving before 3 30 so that I could at20:05least get there before traffic and if I20:07get traffic on the way home that's fine20:08but being late to a showing is like20:10horrifying to me and so I don't want my20:12client to get there before I do and the20:15thing is like I have noticed a massive20:17uptick in um when I'm going to Virginia20:19specifically and getting on 95 or20:22getting on you know 395 first20:24um at 3 30.20:26um so this is a lot of like what we're20:29talking about here is these things are20:30increasing because of the world we live20:33in right now post pandemic right right20:36yeah and so you know like as you're20:39calculating some of well we'll talk20:40about one more thing one thing I don't20:42think people can really20:44understand understand excuse me or20:46predict right now is what if return to20:48work restrictions and rules change20:51and I've been saying that from day one20:53because you know20:55listen I would love to be able to live20:58on a lake and you know my job doesn't21:00allow that obviously but and and21:03predictably know when I'll be working21:06and where I'll be working assuming I21:07stay in that job you know for an21:09extended period of time but I already21:12work restrictions and roles have changed21:14unless you had a work from home job21:16before and your job is exclusively a21:19work from home job21:21uh how are you going to predict what21:23your employer does I mean I'm sure21:24you've reported on the fact that you've21:26got so much empty commercial real estate21:28space right now21:30um to the point where they're thinking21:31about their their planning on making21:33some of that commercial space into21:35residential space so that's a whole21:36different topic we could talk about but21:39um the fact is yeah I mean you just21:43don't know21:44yeah yeah I mean that's that's a totally21:46valid point as well21:48um21:49and I mean I wish I had a crystal ball I21:52could tell you what it's going to happen21:54um but I mean I do think just and this21:57is you know I'm sort of hypothesizing22:00here and you know making my own22:02predictions but just based on everything22:03that I've read I do think that22:06for the most part at least hybrid work22:08will be like a permanent fixture for the22:12majority of white collar workers going22:13forward in perpetuity22:16um and so you know it will still22:19continue even if you do have to go go22:21back into the office you know one or two22:24days a week I do think that we are in a22:26very different world than we were in in22:28early 2020. you know what I mean and so22:31that does that sort of change and just22:35you know22:37the way that we that we live our daily22:39lives has really you know opened a lot22:41of doors for people that I just think22:43that you know will continue to be you22:46know a bigger and more sought after22:48option for people going forward as far22:50as where they live you know sure I mean22:52I think interestingly well obviously22:54there's a lot of federal jobs here even22:55during the pandemic you had people with22:57clearances who are working from home22:59um and I've seen that's where I've seen23:01a huge switch is like okay now you can23:03come back in the office we've got you23:04know like technology that exists in our23:08buildings that are you know for safety23:10reasons for security reasons you know23:13those people are probably not as apt to23:16move outside of the area right I would23:19say unless there's a changing technology23:21unless all of a sudden everybody can23:23have some robust security system you23:26know in their own homes and of course23:28that could make that you know group of23:31employees able to have more hybrid work23:34as well23:36um so yeah23:38and to your point about the federal23:40workers I mean since there hasn't been23:41like you know sort of an exact mandate23:43on exactly what they're going to do with23:45federal workers as far as being back in23:46the office23:48um you know I think it would be really23:49interesting to see like if there is sort23:51of like a definite this is what we're23:52doing like if you know then those people23:55are able to make those the kinds of23:56decisions that other folks have been23:58able to make since they sort of have24:00:00like more feedback on exactly what their24:02:00schedules are going to look like because24:03:00you know I mean the whole federal24:05:00workers thing is like a big reason why24:06:00downtown DC is so empty right now and24:08:00all those office spaces are sitting24:09:00empty right because they don't have any24:11:00sort of like mandate yet24:13:00um and so you know once we sort of a lot24:16:00of these businesses began to solidify24:17:00their exact24:19:00um routines going forward you know I24:21:00think that we might even maybe see more24:23:00people off for this thing as they sort24:25:00of know like exactly what their their24:26:00day-to-day is going to look like sure24:29:00all right well I'm not sure I have much24:31:00more I'm not sure if you have anything24:32:00else you want to add uh anything24:34:00interesting tidbits came out of this24:37:00I mean I just think it's like super24:39:00fascinating I'm really really interested24:40:00in you know the way that we are sort of24:43:00like defining this new normal going24:45:00forward and just the the impacts that it24:47:00has on you know how we live our lives24:50:00um and obviously I mean talking about24:53:00this issue you know touches on just the24:56:00the the lack of affordable housing in DC24:58:00and you know crazy Rising home prices25:01:00across the nation um and it's it's like25:04:00a big issue I mean people want25:06:00comfortable like you know places to live25:09:00where they can have like space to now25:11:00work and live and do all the things that25:13:00you know used to do in three different25:15:00spots and now we're doing a lot of it25:16:00just in one spot25:18:00um and so I mean it's uh it's we're25:19:00talking about sort of like a localized25:22:00sort of story but it really has25:24:00um you know whiffs of all of these25:27:00different issues that are sort of uh25:29:00really plaguing people across the25:31:00country so it's it's super interesting25:33:00yeah well thanks for reporting on these25:36:00things and um you know I'll be25:38:00interested to see kind of what topics25:40:00you're I mean I'm always interested to25:41:00see what topics you'll be covering but25:43:00yeah maybe you'll have some follow-up on25:45:00this at some point and uh yeah and happy25:47:00to have you back as a guest again if uh25:50:00we have something to talk about so thank25:51:00you so much and we will see we'll see25:54:00all you soon25:56:00yes thanks so much

What is a Co-op and How Does it Differ from a Condo? with Guest Jeff Morelli

It’s Spring 2023, the market is heating back up, and Buyers are coming out of the woodwork to explore their options for homeownership in the DC, MD, and VA. Oftentimes as first time buyers enter the market and begin their search, they come across co-op listings but don’t truly understand what they are or how they work. In this episode, Alison is joined by Jeff Morelli, a Lender with Caliber Home Loans who has over 25 years of experience providing every type of home loan available, and together they break down what a cooperative is and how to buy into one, how it differs from a condominium, perceived pros and cons of owning one, and how one finances a co-op transaction.

Subscribe to our show and feel free to reach out to us on The RARE website or directly to Alison with comments and questions: www.theRAREdc.com | alison@theraredc.com IG: @theraredc and Jeff Morelli jeff.morelli@caliberhomeloans.com

hello everybody Welcome Back Jeff thanks for being a guest on the show today good0:14morning Allison thanks for having me yeah um it S Spring day maybe people can't see that0:21well they probably will I'm gonna have to probably move my camera at some point because the sun's gonna hit me but point is it's a spring and in my experience0:27people tend to come out of the woodwork now to start thinking about buying a home I'm interested to see if I get a0:33bunch of calls today actually because it's absolutely gorgeous out um and uh you know I tend to see that0:39first-time buyers come out kind of a lot at this time of year and I wanted to have you on to talk about co-ops today0:45because every single time I start working with a new buyer um I will inevitably get them sending me0:51a listing which looks like a really good price um and they sent it to me and it might0:56be a great unit and the price might actually be good we'll get to kind of pricing in a few minutes but um but it's1:02a co-op and I have to explain to them well you know this is a co-op do you1:07know what that means and sometimes they have an idea and sometimes they have no1:13idea whatsoever so so you know in light of the fact that we have people who might be actually1:18getting into the market and fairly uneducated about this I wanted to bring you on to talk about what co-ops are how1:25they work how the financing works and and go from there so um so thanks for coming on again sure1:33um and and just so people know you've been doing Co-Op loans on and off for for a couple decades now1:40um and so you definitely understand the process and um and so you know you're an excellent resource about uh about this1:47stuff great um yeah all right so this is a brief history just so people know because I found this1:53interesting so as I was researching um and a lot of this information is from Edmund J Flynn1:59um which and anybody's involved in a co-op will probably end up hearing their name end up working with them because they're the co-op Specialists um in this2:06area and they are composed of attorneys who specialize in Co-op transactions can answer any of the legal questions that2:12might come up can just generally guide you through the process and will actually be the ones typically who do the closing for you as well2:19um but so anyway I found out that in 1920 several rental buildings in DC they converted to co-op ownership2:26um and since then you know we've obviously had more uh converted and the thing I found most interesting is that2:31DC is second only to uh to New York City and the concentration of co-ops in the2:37in the country uh that's correct yeah DC is a very big Co-op Market I don't know2:43the exact numbers I would guess New York is probably five to ten times more buildings but it's obviously a huge2:48metropolitan area so uh DC for big cities is actually still relatively small2:54um but do have a lot of co-ops and have had for years there's a few in Maryland there's a couple in Virginia uh and3:02Washington state for whatever reason there's some out there but DC is definitely one of the the bigger Co-op3:07markets or the second biggest Co-op Market um one thing I wanted to comment on you you kind of gave it away that you're in3:14the real estate business when you said it's a beautiful spring day when we're in early February I feel like that spring market for real3:20estate in DC has always started uh with Martin Luther King weekend and almost every year it's like your phone just3:27blows up starting that weekend for the spring and this year was even though the Market's down a little bit it seemed3:32like really picked up a couple weeks ago so yeah I I tell all of my clients they say3:38like when are things going to pick up and I say the first really warm day we have in winter is typically when people3:43start I mean sometimes the crocuses start coming up people start thinking about spring and any kind of marketing that's happening in the world that will3:51like really let go into the spring stuff right and so part of that is just buying home3:56um anyway okay so obviously I think what we need to start with is explaining what a co-op is to people and I will just4:04very quickly say that a lot of this does come down to like legalese and kind of4:09legal entities and and in part how the contracts are written so clearly neither4:15of you or neither of us are attorneys and we can kind of speak in you know the generalities that that frankly a buyer4:21really needs to know right correct so maybe you can kind of kick us off and tell us what a co-op is so the way I4:27always explain the difference between a condo and a co-op or a single family and a co-op uh condos and single families4:32ownership is more or less the same people have an individual title to that4:37property they own that property it shows up on public records that they're the owner and co-ops are different co-ops4:45when you're buying a cup you're basically buying into a corporation is why I always explain it you're buying4:50stock into a company just like you would buy in the Microsoft or company whatever not to plug Microsoft anyway the the in4:58some co-ops actually even give out stock certificates not all of them do but some do and they give you your certain amount5:03of shares and for your shares you get to use your your Co-op unit as your residence so that that's really the main5:11difference it's again you're right there's a lot of legal parts to it but as far as the consumer is concerned5:17that's what their their biggest thing is going to be is they don't have an individual title and a property they're buying into a business and that business5:25owns the building and even when you look up the tax bill for a co-op it's in the name of the co-op property and you know5:32it might be for a half a million dollars or something like that because they've been taxed the whole building is one versus individual units like you would5:38for a condo mm-hmm yep exactly um so I mean obviously from a user5:44standpoint you have the ability to live in and use the space within your let's just say four walls or more walls you5:51know that so from a practical living standpoint it's the same correct it's the same exactly the same um so yeah so5:59I mean again and it depends on the specific condo but you know co-ops almost always6:06cover just when we're going to get to the fees but they cover a broader6:12um number of amenities and things that they cover in my experience but again that does that does differ depending on6:18the building the bylaws and all that kind of stuff I can't recall ever seeing a co-op that didn't include Utilities in6:24the the monthly fee I definitely have seen condos over the years where you utilities are not included generally6:29those have a lot smaller fees um but co-ops I'm not aware of any I think partly because again it's a6:35corporation the company goes and they get the electric bill they get the water bill so it's it's generally in there and6:41and if you're buying a co-op when you get your your resale documents that show all the legal information about the6:47condo or Co-op uh they'll give you a budget and you can see exactly what they're paying every month or every year6:53for water electricity all that stuff right so I mean to go through some other kind of differences or similarities6:59between them I can kind of speak to this and feel free to interject when you want so there there is a board that exists7:04for both right um so and you can try to be on the board of a condo or a co-op Association and7:11they're going to have their own rules about how you would get on and how long you would serve and all of that7:17um the main another like main difference like we were talking about is is how7:22everything is um financing wise with the co-op is done as one Corporation as one building if7:28you will if you want to think of it in that way and a main difference is that a co-op can take out another loan7:36um so they can take what's called a blanket loan so if you had a huge building a huge Co-op building let's say7:42had to do roof replacement you have three options you can use your reserves which you know you get access to the7:49financials obviously when you're when you're getting involved in a co-op you can you can do a special assessment7:56which means you know you might pay one lump sum you might pay x amount per month over the course of you know 12 248:02months whatever and that might not be an insignificant insignificant number could hundreds of dollars potentially per8:09month I think you were telling me off line that your sister had 800 a month special assessment in a condo she did um8:16and she had to do it for they had to do repairs or replace a bunch of balconies she didn't even have a balcony in her8:22condo but she still had to pay and it was like 850 a month for 18 months or something like that8:28um right but a condo it's a much more difficult process for a condo to take a loan8:33um where a co-op because again it's a business they can get uh an underlying8:38mortgage or a corporate mortgage or whatever you want to call it uh alone that the the building can take everybody8:45pays their share of it but because they can spread it over a longer time A lot of times it's a lot cheaper than a special assessment for uh you know8:52similar work right right and so um and again a lot of this ends up being cyclical will kind of8:58bring things back in but like you have access to understanding the underlying initial mortgage amount versus if they9:03took out another loaned along the way but yeah so that was the third thing I was saying if you do9:08um you could do a special assessment you can do using money from your reserves or you can take out that loan and you can9:13take out the loan fairly easily um which again you did kind of say that that condos can potentially take out9:20loans but it's just a much more complicated I've only seen it a few times over the years since we see a9:26budget every now and then you see a loan payment but it's usually a much lower amount I don't think they're going out and getting a million dollar mortgage uh9:33to do you know if you had to do really big stuff like you know to redo the facade redo the the roof whatever9:41um condos generally if you have some big job like that as you said you could pull from reserves but that's not they can't9:47just pull from reserves and then not replenish those reserves so generally there's going to be some form of assessment to replenish them money is9:53money I mean the money if the money is going out the money's got to go back in exactly so9:59that's how it works so yeah so we're kind of starting to get into pros and cons of co-ops and Edmund J Flynn does a10:06I think a really good job of ironing out and explaining what those things are and how a lot of the cons are kind of10:11perceived um it really I think it comes down to your understanding of co-ops you know if10:17you don't understand them you tend to think that there's more negatives um than than positives10:23um but so you know one of the things you mentioned when we were talking Offline that is a huge benefit are the the10:29closing costs um and the low I mean there's a lower buying price right we just talked about somebody who sends me a 300 000 condo10:35and or sorry Co-op and then you know the fees might be a thousand dollars a month10:41um you know the fees are obviously higher per month but the buying but buying price is lower and then the10:46closing prices are are lower do you want to kind of speak to that a little bit sure and one of the things that right now I feel like our uh people have been10:54inquiring about co-ops much more in the last year than we have previously part10:59of that is as you were saying of the prices are lower with interest rates being higher people have a lot less buying power everybody got a little11:05spoiled through covid with the two and three percent interest rates that you know were great for everybody could get11:11them at the time but that's obviously not the case now uh rates are into the fives and sixes they even got into the11:16sevens for a little while back in the fall but thankfully thankfully they've dropped back down but anyway having the11:21buying power is very different than it was so uh if you can buy a lesser price Builder unit you know with the rates11:29being the same between a condo and Co-op uh I'll get into the differences with that in a bit but with them if ranked11:35being the same again you might be able to get a cheaper payment with Co-op even though the fees may be higher uh again11:41with the other part with co-ops the co-op fee generally includes property11:47taxes and a blanket insurance policy for the building condos that's not the case condos because you own your title11:54individually the units taxed individually you pay those taxes yourself every month with your payment11:59versus the co-op where it's included in that fee so sometimes the fees seem a lot higher and that's definitely one of12:05the perceived negatives that you talked about but it's not always reality because there is sometimes more to it12:11right um so another Pro that I would say is you really have minimal responsibility12:17and from that like when you own a property outright you're fully responsible for the maintenance and12:22repairs and you can take more of a back seat with co-ops now I mean with Co-op still with what's in your12:28a lot of some of what's within your four walls um if not a lot is still your responsibility to maintain and take care12:34of um but generally speaking it is a more hands-off kind of uh kind of living12:41situation um you know like there I tend to see more regular maintenance that's12:47scheduled on your behalf things like that so whether or not the cost is kind of how the cost works out like you have12:52these things typically all ironed out from you um I find this to be a huge benefit in12:58DC because generally speaking we have a really big working population people are13:03very busy um you know and it's like that in a lot of cities but you know so a lot of13:09people aren't interested in home renovations home care you know they don't have the time for it or they don't13:15feel like it speaks to their strengths um so you know you can have somebody who or an entity or you know a board or13:22whatever excuse me who kind of helps you maintain that stuff right um one of the other things with with13:29perceived negatives since you were talking about that a couple minutes ago is the board approval that's one of the13:34and I know I'm kind of getting ahead of myself with differentiating between the two but I figured that's definitely one13:39of the negatives that's the thing I hear people kind of you know grown about the most uh is that they have to go through13:45this board approval process they're really different amongst all the co-ops some are13:52essentially like a rubber stamp you apply you give them the paperwork they say okay great most have some form of an13:58interview process some there's a couple that when I say they do a mini mortgage14:03application they ask us to give prop copies of their credit report the appraisal bank statements pay stubs14:10basically everything that we look at so which is an interesting scenario because you have people living your building14:16that literally know everything about your finances which is not how condos work for sure or any other situation so14:22those board approvals some of them are a little bit more intrusive than others over the years I've had a few issues I14:30think I mentioned this to you and we spoke earlier I've had a few times where customers were rejected for various14:36reasons um which one was I think I told you this story was a masseuse and she wanted to14:43run her business out of the the building and they rejected her because they didn't want strangers coming in and out14:48of the building not only unreasonable but you know not something that she thought about I had other people uh back14:54out themselves because of you know they had a dog that wasn't acceptable or things like that so there there are a14:59lot of things that Co-op boards look at and ask about some co-op boards have their own financing requirements they're15:05different than ours um some are really strict with qualifying ratios again not to boggy15:11down on boring mortgage stuff but qualifying ratio is basically a ratio of your mortgage payment and your debts15:17relative to your income uh and sometimes the buildings like there's one building that has a 33 ratio we can go up to 4515:25sometimes even 50 percent of someone's income they say 33 much much more conservative so that's somewhat of a15:33negative that can make it a little bit more difficult and the same token one of the positives about co-ops more so than15:40condos I think because they do have the second level of review they have another group of people looking at their their15:47qualifications that Co-op deficient or delinquencies are extremely low15:52especially in the DC area we almost never see buildings that have high delinquencies where condos so every now15:59and then you're running the one that's that's 30 40 delinquent on their fees uh it makes it really hard to get a16:04mortgage long term it's bad for the health of the condo because of their finances so even though it's a kind of16:10perceived negative that these things exist and the boards look at all this stuff the net positive is the default16:16rate is much much lower on co-ops um and the bars I've noticed just anecdotally tend to be very well16:23qualified usually have really good credit and money to work with as well so yeah I mean obviously it does depend on16:29the building and offline you and I talked about how one of the I've been very lucky in that the co-ops I've worked with on the deals have been very16:36successful we haven't had many issues but I did do one in the Watergate where they scrutinized literally every single16:44thing that my buyers went through right um so and the thing is I'm I'm really16:49uninvolved the Realtors and uninvolved in a lot of that it is between the board and the buyers16:55um but of course I hear about what's happening and right one might say it's a little bit aggressive but you know at17:01the end of the day like you end up knowing your neighbors maybe too much about your neighbors but you know17:07um you're kind of all on the same you're on the same kind of playing field if you will like you have access to that17:14um yeah I mean you're definitely it's more at least when you're applying I I think it's a again this is not based on17:19anything factual but it it's probably a little bit more of a community in the sense that you know before you even17:24start you're you're going to meet a handful of people and talk to them and are going to ask you a bunch of questions I'd have no idea what they ask17:30in those those um board interviews but I'm assuming some personal some Financial17:36um but nonetheless you get to know some people and you get to know the you know the the players in the building as well so yeah no it's totally true you can17:43move in and not know anybody if you live there 10 years absolutely I mean when we moved into our17:48condo the one I've been in for five years now we actually had a part or like a get-together for our neighbors when we17:54moved in because we wanted to make sure that we had a relationship with them and I think one I'm pretty sure one of them18:00said oh you know like no one's ever done this before and I was like how do you that's crazy right we share walls like18:05how do you not want to at least initially like have a a nice meeting not like hey welcome to the building you18:12know uh the roof's falling off you know like you you'd prefer to have some kind of uh relationship we definitely get a18:18lot of referrals from people that uh are that yeah I'm trying not as much now18:25because people aren't refinancing but for the last couple of years those people were refinancing we got a lot of referrals from somebody that said hey I18:31live in the building with you know so-and-so you did a loan for and they asked me to get in touch with you to talk to you about a refinance again I18:37don't feel like we get that as much in condos but I feel like it happens a lot in co-ops again I just think18:42the board is much more active I think the community the homeowner association is much more active uh where they do18:48stuff together and you again you just get to meet people and and a little bit more involved yeah yeah agreed18:55um okay so a couple more of like kind of the pros and cons depending on how you believe it so the high monthly fees you19:02know are they really are they really that much higher you know I would say it ends up being a wash a lot of times and19:08you're going to give us an example at the end which I think is really awesome for people to hear so we'll kind of save that19:14um so the the two cons I hear the most aside from the high fees which we can19:20kind of knock off pretty easily is that as the restrictions and part of that does kind of go into19:26the interview processes and like you could have people be you know they might19:32not make it through the interview process or that's a restriction it can be a restriction19:37um and also you know there are going to be in my experience there are sometimes19:43more um stringent rules on renting um on uh pets and things like that19:50um you know it's it's harder again in my experience with what I've seen to change those bylaws19:57um and and you know and and get those those things changed or addressed so20:03restrictions are really important to pay attention to frankly for any any purchase I would say anything in a20:09living place for sure if a condo or Co-op you know they all have rules with with that thick condos generally this is20:16something that comes up a lot if we're doing a VA loan which you can't do on co-ops but for condos if you're doing a VA loan one of the things we have to20:22look for is rent restrictions so I've read through hundreds of bylaws over the years and almost none of them have rent20:29restrictions co-ops different story a lot of the buildings do limit the the financing side on for us a call up can't20:37have more than 50 percent renters which again is a perceived negative uh if you20:43plan on buying it I mean if you're buying a co-op and you want to keep it as a long-term investment property that's probably not the right property20:50to buy because uh the co-ops are different a lot of them even though they may let you rent sometimes they say you20:57can only rent for two out of three years so um you can you can't keep it like you21:03know forever as a rental uh which is much different than a condo but at the same time even though that's negative21:10that there's a reason that those rules exist and there's a reason that Fannie Mae and Freddie Mac the people that21:15write all the rules for mortgages care about that is that if buildings get too heavy with investors they tend to have21:22more delinquencies and more problems and less be or just less financially healthy21:27so long term it's it's better for you that they have those rules exist you may21:33not think it at the time but the reality is is that that's why they exist is it does keep the building much more21:39financially stable because yeah you know people pay their mortgages more often on primary residences than they do on21:45investors yeah um okay so before we kind of get into the the buying process which is21:51obviously one of the most important things I'm going to talk about it's people think that there's less liquidity with condos that they're harder to sell21:57that you know you're not going to make as much money and I mean at the end of the day because the purchase and sales22:02price is a little bit lower yeah you're not going to uh the values are not going to go up to the same um at the same22:08degree as say a condo or a single family house would but we've talked about the pros so that might just offset that for22:14you from a you know personal standpoint um one note on that with with co-ops the22:19closing costs are a lot less expensive which makes buying and set well more buying than selling but buying less22:27expensive up front with money that frankly you just don't get back there's no owners or lenders title insurance22:33which is thousands of dollars difference on a similar price condo uh that you22:39don't have to there's no tax proration where you have to credit back the seller for taxes they've already paid Depending on time of year it could be hundreds it22:45could be you know lower thousands for that in and then they also don't have title search fees because there's not22:51really a title for the property so that's a big difference in Maryland there's actually no transfer taxes which22:56is very different that's not the case in DC but Maryland there's no transfer taxes so the closing costs if you buy23:01one of the few co-ops in in Maryland it's it's significantly less expensive thousands and thousands but again that23:08could make it a lot easier of a starter home for somebody uh and if you turn around and sell it in two or three years23:14you don't have as much time to have to recoup the that you know the Lost costs23:19with the closing costs right um right I don't know if I can really speak to with any Authority on on how23:25the prices change you probably would know that better than me again anecdotally I've heard that they they move slower up and down but23:32um but you again you'd know better than I would on that yeah and I mean one some people say that23:37it you have a less a smaller buyer pool but I think a lot of that does come down to education and people understanding23:43what they are and what it means and the pros and the cons and et cetera et cetera so that goes for agents too by23:48the way uh you know with not just buyers I I quite often have agents that call me because our name's on the one of the23:55approval lender lists at the co-op and they've never dealt with a co-op before and don't have a lot of familiarity with24:00:00it and and you know from an agency how do you educate people on it if you don't understand how do you sell it if you don't understand it correct like how you24:07:00know yeah if you're looking at places apartments for people or looking at condos uh and and a co-op pops up and24:13:00you've never sold one before and you don't really understand it you may not even show it to them right because it it24:18:00may not be something you're familiar with or whatever so it is good to educate everybody on it because it you24:24:00know it can be a really great way to get your foot in the market especially if you're a younger you know first time24:29:00home buyer doesn't have a whole lot of money most buildings we can do five percent down uh where there are some24:35:00co-ops that require 10 and 20 but the majority of them five percent you can do and since the closing costs are less24:42:00it's you know it is more manageable yeah all right well I think we can kind of get the just kind of end with uh24:49:00explaining how the financing differs um from co-ops to to condos obviously24:56:00this is kind of your this is your wheelhouse so um you can explain well before you25:01:00explain it I I want to say that something I've experienced from The Lending perspective is that not all25:06:00lenders actually do loans for co-ops and so the first thing I say when I meet25:12:00with people is I understand what they want what their timeline is and then I ask them if they have a lender um and I I encourage them to develop a25:21:00relationship with a lender so that when they're ready to jump because this Market's crazy and you might have to jump quickly that they already have25:26:00everything kind of ready but the fact is if you if you're considering co-ops you25:31:00might have to switch if your lender is not somebody who who works with them and I will say a lot of lenders in this area25:37:00don't that's correct uh it's they're a handful of companies a couple bigger25:42:00Banks and then a couple of smaller companies caliber is kind of big and small at the same time we're one of the25:48:00largest lenders in the company but we do everything locally I do everything my office all our Underwriters are here so25:53:00I live in the area work in the area for 25 years so um so we're big and small at the same26:00:00time but anyway uh with co-ops the we do quite often have people that come to us26:05:00and have already been pre-approved we're looking at condos that Co-op they were interested in came up and they have to26:11:00switch lenders and restart the whole process have a new credit report run give another stranger your financial26:16:00information your pay stubs your bank statements W-2s all that kind of stuff um so it does happen quite often good26:22:00news is again I'll plug myself a little bit if you come to me in the beginning we can do condos co-ops or single family26:29:00uh so and we go Maryland Virginia DC so you can cross over and not have to like26:34:00reapply if if you end up buying a co-op um so that is definitely one of the things is there's not quite as many26:40:00lenders that do it um and and it's good to if you if at all thinking about co-ops to be provide26:47:00somebody that can do both um as far as the differences of the financing I touched on the down payment requirements that the co-ops have26:53:00assuming the co-ops don't have uh any different financing requirements it defaults to five percent down there are27:00:00some scenarios where we can do condos with three percent down so uh as an extra two percent minimum that you'd27:06:00have to put down on a co-op versus a condo but outside of that the financing is very very similar there's not a whole27:13:00lot of differences we qualify all the same way we the loan process is more or27:18:00less the same we ask for the same documentation um credit standards all that stuff is identical uh only a real difference is27:25:00with interest rates if you're putting less than 25 percent down on a condominium Fannie Mae and Freddie Mac27:31:00charge a premium that makes the interest rate anywhere from a quarter to a half percent higher with co-ops they don't27:38:00charge that I I've never gotten a complete clear answer on why that is but I'm assuming it's because condos have a27:45:00higher default rate than co-ops do we kind of touched on that earlier that yeah there are more you know the co-op27:50:00has their own standards and because of that their default rates a lot lower so that premium doesn't get charged on condo so if you are doing a lower down27:57:00payment 20 less than 25 percent um there there are you know the condo definitely can have a higher rate than a28:03:00co-op you know all things being equal otherwise though the financing process everything28:09:00everything is more or less the same timing wise we it usually does take a little bit longer for two reasons three28:15:00reasons really uh as you said there's only a couple there's only a few title companies that do them uh EJ Flint's the28:22:00big one Monarch Title as well um because they're the only ones they're busy all the time uh and yeah title may28:29:00take a little bit longer to come back with them just because of the volume um secondly the appraisers take a little28:35:00bit longer because they have to get a lot more information than we they normally would for a condominium right uh and then they're obviously the board28:42:00approval process some of the boards meet every couple weeks some only meet once a month so that has to be done prior to28:48:00closing because they have to get that board approval the title company requires that we require seeing a copy28:54:00of it and the board requires it before you can close so that can push the time out a little and then the last thing the28:59:00one thing that really does separate the two that is significant is that Co-op building approvals that we do we look at29:07:00every building Condominiums if you're putting 10 or more down in most cases it's a pretty streamlined29:13:00process uh if you put less than 10 we have to get budget and a few different things with co-ops on every Co-op we29:21:00have to get two years of their financials uh that have been audited we have to get a budget we have to get a29:26:00questionnaire we get a pretty healthy stack of paperwork that has to be reviewed a lot of the buildings we have29:32:00approved already so we're just updating and not doing a full approval every time but it is a fair amount of paperwork29:38:00that we have to get together and sometimes it's pretty involved again the net is that we're looking at the29:44:00health of the building and the financial well-being of the building and really looking out obviously for ourselves but we're looking out for the customer who29:50:00you know my guess is most people when they get condo and Co-op resale packages29:55:00glance at it and don't really dig too deep um yeah we do have people that call and30:00:00ask really specific questions but most people just you know they probably look at it and figure it's fine and whatever but with co-ops we get pretty far into30:07:00that so that definitely that's the biggest differentiator between the two uh it is much more involved of a process30:14:00yeah and really quick because we're going a little long on this episode but um right in the beginning yeah actually30:20:00I think it was me this time but um you in the beginning kind of gave me an example30:26:00um of the difference in payment for somebody so I mean I guess a good way to conclude this episode is telling people that you know we talked about how the30:32:00high I'm putting in quotes monthly fees um make it seem like maybe you're going to be paying a lot more for a co-op but30:39:00really in the example you gave me if you want to quickly tell people I mean sure I have some notes it came out about the30:45:00same if I'm looking away I want to make sure I'm giving them right numbers so I had a person just this past weekend call me about the Capitol Hill Towers Co-op30:53:00um it's a newer building I want to say it was built in 2006 or something like that most co-ops are 100 plus year old31:00:00buildings this one is newer um they have a pretty significant underlying Mortgage in this case for his31:06:00unit the sales price is 375 and the um the underlying mortgage allocated for31:13:00his units 95 000 which again sounds like a lot and you'd think oh well that's not necessarily great but where it helps is31:19:00that underlying mortgage they have like a two and three quarter percent interest rate on it so ninety five thousand31:27:00dollars that the borrower was essentially borrowing for that underlying mortgage for their unit is at31:32:00a much lower rate than where rates are today so that helps with the payment a bit um the way that that works is the31:39:00underlying mortgage stays with the unit So when you buy or sell a co-op whatever31:45:00the it gets paid just like any other mortgages principal interest every month and the balance goes down every month as31:50:00you pay it down as part of that Co-op fee that balance when you go to closing31:55:00the title company will verify EJ Flynn or Monarch or whoever will verify a32:00:00couple days before settlement the exact amount of the underlying mortgage at closing and that basically goes on the32:07:00seller side and the buyer's side of the settlement statement and it basically transfers from the seller to the buyer32:12:00again in this case they're transferring a 2.75 rate so in this case the sales32:17:00price was 375 the bar was putting a hundred thousand dollars down he was lucky he had a lot of money to work with so I ran the numbers with that32:23:00underlying mortgage the fee there is 9.55 which for a 375 thousand dollar unit you'd say oh that's really high but32:31:00his total mortgage payment became was two thousand seventy five dollars I've ran the numbers for a condo he was32:37:00looking at Virginia the taxes for that were 351 bucks a month and the fee was32:42:00469 a month so when I ran the numbers and he did there was no underlying mortgage on that because it's a condo so32:48:00he had to finance that extra 95 000 with the higher rate the payment on that one ended up being 2 540 so it was almost32:57:00500 cheaper for the co-op even though that fee is really high um so that's real numbers it doesn't33:03:00always work that way but that was a real example from somebody I talked to just a couple days ago and now he's mulling33:09:00over which you know does he want to move to the verbs or does he want to buy this place in DC that I can't help with but33:14:00the the numbers I get so right well I mean and I think that to bring us completely full circle as p as the33:20:00market is heating up and and rates are still higher than they were a year ago you know we'll have people say you know33:25:00they're historically still not that high blah blah but as you're trying to compare what to get right now might not33:31:00be a bad time for you to consider the co-op because of the underlying mortgage that may have an insanely low rate right33:36:00and not all buildings have underlying mortgages there's a lot in DC that don't yeah but um yeah this particular one has33:41:00a larger one um but yeah that again it's something I think more the confusion that they don't people don't understand it33:48:00um one last thing I want to touch on that I'm sorry to difference in the financing uh is the way we calculate the33:54:00the mortgage amount when you're buying Co-op when you are getting a condo if34:00:00like make the math easy if it was a 400 000 sales price and you're putting a hundred thousand down you're borrowing 300 000. if you have a34:07:00co-op that has a hundred thousand underlying mortgage and a four hundred thousand dollar price34:12:00we take the 400 000 we subtract the underlying mortgage and then we figure out your down payment from that and in34:19:00that case you'd only borrow 200 000. so where that really matters is if you're looking at a to do a minimum down you're34:24:00trying to do five percent down five percent is usually cheaper if there's an underlying mortgage for Co-Op than it34:30:00would be for a similar price condo because of that factoring in that that underlying mortgage yeah well Jeff thank34:37:00you you are a wealth of knowledge when it comes to this and I will be linking your information in the show notes I34:42:00mean if people are interested in just even talking about this with you um and I will say just real quickly I haven't34:48:00worked with you before but you were recommended from a colleague um A lender who's been on the show many34:53:00times before so you know if people have started working with somebody else and they you know they're interested in a34:59:00co-op but you know it doesn't mean you're you don't have options right definitely so keep that in mind well35:05:00thank you so much and uh we will talk to you soon thanks Allison thanks for having me okay no problem

Rent Move Buy - Ep 55: Buying, Owning, and Selling Real Estate and Tax Implications with Guest Ted Phillips

Taxes: we all pay them and 99% of the time, we don’t know the ins and outs of the complicated tax code that exists in this country. At some point in our lives, we likely hear that our taxes can be affected by real estate – if we own it, invest in it, or sell it, but beyond that, there are a lot of nuances that we may not really grasp. In this episode, Alison is joined by Ted Phillips, aka The Dely Ray CPA, and together they discuss tax implications and concepts that can and will apply to anyone involved in a real estate transaction.

Subscribe to our show and feel free to reach out to us on The RARE website or directly to Alison with comments and questions: www.theRAREdc.com | alison@theraredc.com IG: @theraredc and www.thedelraycpa.com

Rent Move Buy - Ep.54: Medium-Term Investment Properties with Guest Zeona McIntyre

With the enforcement of newer short-term rental laws in the DC area, some people may find themselves unable to rent their investment properties as short-terms on platforms like AirBnB or VRBO. But what if another option, in addition to long-term rentals is medium-term rentals? In this episode, Alison is joined by Zeanna McIntyre, an investor, Realtor, coach, and co-author of “30 Day Stay: An Investor’s Guide to Mastering the Medium-term Rental.” Together they discuss what medium-term rentals are, how they can be a sweet spot for cash flow, and how to generally navigate them.

Subscribe to our show and feel free to reach out to us on The RARE website or directly to Alison with comments and questions: www.theRAREdc.com | alison@theraredc.com IG: @theraredc and www.zeonamcintyre.com

Rent Move Buy - Ep. 53: Condo Associations and HOAs: Pros and Cons with Co-host Michael Fowler

Rent Move Buy - Ep. 53: Condo Associations and HOAs: Pros and Cons with Co-host Michael Fowler

What is a condo or homeowners association? What are the differences between the two?  And what do they even do or provide a homeowner? In this episode, seasoned Agents Michael Fowler and Alison break down all that you need to know about them and what documents one should especially pay attention to when deciding to buy a property that is guided by one of these associations.