Becoming a real estate investor in the D.C. area is a choice, and at EJF Real Estate Services, we know every investor has a different 'origin story.'
- Some people have the chance to become a rental property owner without much premeditation, perhaps through receiving inherited property and the subsequent desire to transform it into a stable, long-term investment.
- Others acquire a spare property when they move to a new home for their growing family, and keep their former home as an investment during a buyer's market.
- 'Career investors' deliberately seek out real estate, purchasing a rowhome or condo for rent in D.C. with an express interest in generating income from such rental properties.
While these are, indeed, distinct approaches, no matter how you find yourself entering the world of real estate investing, it is crucial to understand that you are operating a business once you do so.
As the expert among available property management companies, D.C. investors, we see many people come through our doors looking for answers about getting started in the harrowing D.C. rental market. It's always wise as a first-time investor to seek additional information before you invest in your first property!
Getting into the D.C. rental market and real estate here comes paired with rules and regulations in our nation's capital that govern how you can operate your new business. Before a resident ever signs a lease, you must know the rules for becoming a qualified investor.
Failure to follow county or city laws covering licensing, health, and safety regulations can bring significant penalties! Therefore, it's worth exploring this topic in detail to discover how to get your business license before you launch your rental property business fully. If you feel you might have failed to get a license when you needed one, get one now without delay!
Please note: This post is not a substitute for proper legal counsel and contains information that was current at the time of its publishing. When in doubt, it's best to reach out to the professionals at EJF Real Estate Services or to obtain guidance from a skilled attorney.
Owning D.C. Rowhomes for Rent
D.C. rental law considers homeowners who rent out detached, single-family homes, duplexes, rowhomes, condo units, and individual rooms as an official business.
Applying for Your License(s)
- Property owners who hold such properties must apply for a Basic Business License (BBL) for every rental unit, including single-family homes.
- Renting multi-family apartments, buildings, and any other type of property with more than three units requires a separate apartment business license.
- The website for the D.C. Business Center offers insights into the different kinds of licenses available specifically for rental property businesses operating in the D.C. rental market.
To obtain a license, you will have to certify that you do not owe the district more than $100, which includes interest, penalties, existing taxes, or fees. After completing the Basic Business License, your rental unit (or units) must be registered with the Department of Housing and Community Development's Rental Accommodations Division.
Passing Your Inspection(s)
As a newly-minted investor with rowhomes for rent, Washington D.C. property owners will also be required to pass an inspection for each unit.
- Inspectors will look at three general areas, such as the overall state and condition of the unit, the household composition, and whether a property owner has certifications for components such as cooling or heating systems, ventilation, and water.
- Lastly, you will need to obtain a Certificate of Occupancy permit for each rental unit in your portfolio.
- As you can see, being an investor in D.C. involves a fair bit of paperwork—which includes getting a Basic Business License (BBL).
- Whether you're renting out your basement, a condo, or a four-unit apartment building, you'll need to get a BBL and pass your inspection.
The goal of this system is to ensure that D.C. renters have access to safe, decent housing in our nation's capital, and for all businesses to be registered—and not operating outside the legal system (primarily for tax purposes). While the work to get licensed may seem extensive, it's actually a benefit to be able to work in a business marketplace where every other business must also abide by the rules.
Further Details of Note for Investors
The process differs based on the number of D.C. rowhomes for rent in your portfolio, but the necessary steps remain the same. All prospective investors should check available zoning maps to ensure they are compliant with current zoning regulations and do not owe more than $100, as stated above.
Once those hurdles have been cleared, you'll still need to do the following.
Obtain Your Certificate of Occupancy
Most categories of rental property require a Certificate of Occupancy, which can be obtained from the DCRA. These occupancy certificates are distinct for homes inside and outside the district itself—so be aware that if you operate on the edges of the District of Columbia, you may have to work with multiple distinct occupancy certifications.
Some buildings that are subject to a zoning commission may also have additional review steps not listed here.
Register Your New Rental Business
You'll need to register your business with the Office of Tax and Revenue. Since you are now a full-fledged business and may eventually need to pay employees (including yourself), you'll want to apply for an Employer Identification Number (EIN) through the IRS, and then register that EIN online in D.C.
These steps make it possible to pay any local or federal taxes that crop up and smooth your way when tax time comes around.
Fill Out the Basic Business License Online
A comprehensive business portal exists to make applying for this license simple and straightforward. However, pay attention to the supporting documents that may be necessary in your case.
The options available allow you to do this in a variety of ways:
- Apply conveniently online
- Apply by mail with the right paperwork
- Apply in-person via a no-appointment-necessary option.
The Basic Business License also helps you ensure that you have other elements (such as your tax registration) handled in a timely fashion so that you have everything you need to properly operate a rental business in D.C. There is an associated fee that changes periodically but isn't designed to be prohibitive.
Ensure Your Unit Is up to Code
Though your BBL is in hand at this point, if you don't get an inspection within 45 days, it might be revoked.
The inspections involved for the D.C. Certificate of Occupancy will relate to the standards in the Green Building Act, as well as the construction codes of the area. While it can be frustrating to discover that one's building isn't up to code, it is far better to discover it in the process of preparing the building rather than later when code violations can result in hefty fines or dangerous living situations for your renters.
File Appropriately for Your Condo for Rent in D.C.
Next, you must file with the Department of Housing and Community Development, either to register as a rent-controlled unit or to ask for an exemption from rent control. Read more on the department's website about how the rent control laws affect you—and what works best and is correct for your circumstances as a property owner.
For more information about this process, you should also visit the DCRA. Business licensing can take time, so as soon as you believe you want to offer D.C. rowhomes for rent, begin your process and see what steps you can take so that you aren't waiting for occupancy for too long.
Work With Property Management, D.C. Investors!
EJF Real Estate Services has worked with many property owners and investors over the years. We have elite experience managing condos and D.C. rowhomes for rent within community associations as an extension of our association management services. No matter what type of property you intend to rent, we have the expertise and skills you need to do so successfully.
Whether you have been involved in D.C. real estate for many years or you are just beginning your investment adventure in the D.C. area, working with experienced property management, D.C. investors, provides helpful insight to avoid costly mistakes from the beginning.
You'll also find that you have more time to devote to your other pursuits when you have a property management partner handling your daily management tasks rather than you having to juggle it all yourself!
Get to know EJF Real Estate Services better through our many valuable blog entries and through our online resources. If you require any additional information, you can reach out to us at any time.
