Did you know Washington, D.C., is home to more spies per square mile than anywhere else in the U.S.? While the intrigue may draw secret agents, the city’s diverse job market, iconic landmarks, and bustling culture attract people from around the globe. Pair that with its strong economy and constant demand for housing, and you can understand why D.C. is such a hot spot for international real estate investors. If you want to break into this dynamic market, this guide can help. Below, we’ll cover everything you need to know about investing in Washington, D.C.
We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.
Debt-service-coverage-ratio (DSCR) loans are popular among real estate investors. These loans are favorable to foreign investors looking to buy income-generating properties.
A DSCR loan allows you to purchase rental properties in the U.S. Unlike traditional loans, DSCR loans don’t rely on the borrower’s personal income. Instead, they focus on the property’s cash flow, making it easier for investors to qualify based on the property’s potential revenue rather than individual financial details.
These loans also offer more flexibility in terms of documentation and qualifications, making it a practical option for foreign nationals looking to invest in Washington D.C. real estate. Compared to traditional mortgages, the DSCR loan process is simpler and more streamlined, helping international investors access lucrative U.S. property markets with fewer barriers.
DSCR loans offer tailored solutions to make financing for investment easier for you. Here are the primary benefits of DSCR loans you should know about:
If you want to invest in the lucrative Washington D.C. real estate market, a DSCR loan may be the right option for you. Explore our diverse range of DSCR loans to confidently move ahead with your property financing plans.
When you set out to explore options for real estate investment loans in D.C., you’ll quickly find out that each lender has their specific requirements. However, most lenders adhere to a few standard and critical benchmarks. Below are some of the most common considerations:
Most Lenders: Income earned on U.S. soil is easier to verify. Since lenders are more familiar with U.S. income streams, it typically isn’t as closely examined as money earned abroad. However, your income sources may lie in your home country. Because of this, some lenders may not lend to you.
Those who do will require extensive documentation to establish a stable and consistent income source to pay back the loan.
Many different types of documentation can be used to do this. Examples include bank statements, pay stubs (for salaried people), tax returns, rental income statements, and many others. Keep in mind that lenders may require all of the previously mentioned documentation to be from the U.S.
Waltz: Foreign national loans are our specialty. We understand that documentation can differ based on where you’re from and make it easier for you to verify your income by asking the right questions. Waltz reviews documentation from your home country to qualify you for a loan. We also take into account the income potential of the property you want to buy.
Most Lenders: It’s common for most lenders to ask that you pay 30-50% of the loan amount in a down payment. Sometimes, it can even be higher. Additionally, lenders may require you to maintain and show a certain percentage of the loaned amount as a reserve in your bank account.
They do this to account for situations where the property is vacant or needs maintenance and repairs. This standard practice often becomes a deterrence when going for financing options.
Waltz: Our required down payment amount varies. We evaluate each potential buyer on a case-by-case basis, which is why down payments can be as low as 25% for some buyers (however, 30% is the standard). Based on various factors, it’s also possible to waive the reserve requirements for some borrowers. Learn more about our mortgages for foreign nationals.
Most Lenders: Establishing proof of identity (KYC) is a standard practice for investment loans. Most lenders require you to present your passport and visa. For loans related to investment properties, lenders commonly require that the loan be made to an LLC based in the U.S., with you serving as a personal guarantor.
Waltz: We need only a valid passport to verify your identity. If you don’t have an LLC, we can also help you create one. Our Investor Toolkit includes an LLC with an Employer Identification Number (EIN)—all in just minutes!
Most lenders: A credit score is an essential requirement for a loan. Lenders have different credit score requirements, with some even accepting scores as low as 640. That’s not the problem, though. The issue is that they typically rely on a borrower’s FICO score, which, as an international borrower, you may not have. Many lenders are hesitant to lend due to the lack of a credit history in the U.S.
Waltz: We understand that you’re not a U.S. citizen, and so we don’t require you to have a U.S. credit score. We have our own method of assessing your credit score by analyzing your credit history in your home country and our expertise in international credit ratings and standards.
Find out how international investors have benefited from working with Waltz.
Now that you know the most crucial factor for success in the real estate investment market is the type of property you choose, let’s focus on what Washington D.C. offers.
The unique features of the Washington D.C. real estate market make it an intriguing option for international investors. Here are a few benefits of investing in the United States’ capitol:
Location is everything in real estate investments. So, here are the top neighborhoods in Washington D.C. that are great options for investing:
Unlike other D.C. neighborhoods, Deanwood provides more cost-effective property options. While historically undervalued, the neighborhood is now showing significant growth potential, thanks to ongoing revitalization efforts and projects.
Once known as an area with larger homes that lacked amenities, Deanwood has come a long way. Now, It attracts attention for its increasing amenities, such as retail spaces, parks, and improved public transportation, including access to the Metro’s Orange Line.
These two adjacent neighborhoods in Northeast Washington D.C. are another excellent investment opportunity. Both areas have homes with affordable pricing but strong potential for property appreciation.
More than a few home prices in Lily Ponds have increased by nearly 50% in the last few years. Kingman Park, with its historic charm, and Lily Ponds, with its quieter, suburban feel, attract professionals and families seeking affordable, well-connected living spaces.
This is one of the more affluent neighborhoods in the D.C. area, so it’s certainly not the most “affordable” entry point into the real estate market in Washington D.C. However, it's worth considering if you have your eye on a strong rental income and long-term growth.
This is because Dupont Circle is home to embassies, upscale shops, art galleries, and renowned restaurants, making it a cultural and social hub. Also, the Dupont Circle Metro Station (Red Line) provides excellent connectivity to other parts of the city, making it one of D.C.’s most sought-after neighborhoods for renters.
This is an excellent neighborhood if you like to have diverse property options. Adams Morgan has a mix of historic rowhouses and modern condo buildings. Its prime location, just north of Dupont Circle, offers easy access to downtown D.C.
Its proximity to employment hubs makes it highly appealing to young professionals and students. The neighborhood’s strong rental demand is also fueled by its dynamic nightlife, which features the trendiest bars, restaurants, and music venues.
A suburb of Washington D.C., Groveton combines affordability with proximity to major employment hubs, including downtown D.C., the Pentagon, and Amazon’s HQ2 in nearby Arlington.
You can choose from single-family homes, condos, and modern townhomes that cater to a diverse pool of renters. The area is also seeing steady development, including new retail centers, dining options, and parks, further boosting property values.
Located in Northeast Washington D.C., Trinidad is well connected to downtown D.C., ensuring strong demand from commuters. The neighborhood is being revitalized, with new retail, dining, and entertainment options contributing to its growing appeal.
Washington D.C. offers a unique set of factors that investors should consider before buying an investment property. Here are some key considerations:
The DSCR refinancing process for your Washington D.C. investment property involves replacing your current mortgage with a new one that aligns better with your financial goals. For foreign nationals, this process typically begins with assessing your property's current market value and exploring different loan terms and interest rates to find the most favorable deal.
You'll also need to prepare financial documents, including income verification and proof of property ownership. Once these steps are complete, you can submit your application, and after approval, you’ll finalize the refinancing transaction. This process enables you to adjust your mortgage terms and optimize your investment strategy in Washington D.C.
Rate-and-term refinancing allows you to modify the terms of your current mortgage. Depending on the interest rate environment, you may be able to get a lower interest rate than you currently have. While refinancing to a lower interest rate may seem like a cost-saving move, keep in mind that it could result in higher overall finance charges over the life of the loan.
Cash-out refinancing allows you to tap into your property's equity, providing you with additional funds. For investors in Washington D.C., this money can be used for home improvements, consolidating debt, or making a down payment on another property. By providing cash at closing, it opens up more investment opportunities and financial flexibility.
Here are some answers to frequently asked questions about getting a mortgage on an investment property in Washington D.C.
Yes, you can get non-QM mortgages in Washington D.C. These kinds of mortgages have requirements that are better suited for non-U.S. residents. Waltz can help you navigate these requirements with ease.
Washington D.C. is an international city with a lot to offer, such as a central location, a flourishing job market, and diverse property options. However, the decision is ultimately yours, based on your investment goals.
No! In fact, Washington D.C. has one of the lowest property tax rates in the country. According to SmartAsset, the D.C. tax rate on residential property is $0.85 per $100 in assessed value.
Securing a DSCR mortgage as a non-U.S. resident may seem complex, but with Waltz, it’s more accessible than you think. Just follow these seven steps:
1. Find a profitable investment: This is the key to getting the most out of a DSCR mortgage. Focus on properties with strong rental potential. Analyze local rental rates, occupancy trends, and future development plans.
2. Gather essential documents: Key documents typically include a valid passport, proof of income (such as foreign bank statements or business financials), and property details. Lenders may also request proof of assets or a credit report from your home country.
3. Select a lender familiar with foreign nationals: Look for a lender experienced in working with foreign nationals. They must understand foreign investors' unique challenges, such as limited U.S. credit history and foreign income verification.
4. Set up an LLC and U.S. bank account: Most lenders will require you to set up an LLC to get a DSCR loan. If you don’t already have an EIN, it will take a significant amount of time to open a U.S. bank account, which will be needed. With our Investor Toolkit, you can instantly get an LLC and U.S. bank account and shave off months of paperwork!
5. Submit your loan application: The application process involves confirming property details, financial documents, and proof of the property's income potential. If you’ve completed all the previous steps, this should take almost no time.
6. Perform due diligence: This includes an inspection, property appraisal, and any other requested documentation. By this stage, you should also receive a term sheet from your lender.
7. Complete the purchase process: With due diligence completed and the loan approved, it’s time to finalize the transaction. Now, you’ll sign the necessary paperwork– if you live outside of the U.S., this can be done virtually in most cases. From there, all you’ll need to do is transfer the funds to close, and you’ll own a rental property!
