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Why You Can Buy This Home for ,490 (No, That’s Not a Typo)

Every once in a while, we editors here at realtor.com® spot a real estate ad that gets our B.S. detectors blaring, and this week we spotted a doozy: an apartment for sale in Washington, D.C., for $1,490.

Nope, that number is not missing a couple of zeros. And that’s the price to own—not rent—this 580-square foot, one-bedroom, one-bath at 2711 Q St. SE, located just across the bridge from Capitol Hill.

Is this for real? A few phone calls confirmed that yes, this place exists and is legit, although it does come with a few major strings attached. Allow us to explain.

Why is this apartment so cheap?

This modest price tag is due to the fact that this place is a limited-equity co-op (LEC). Let’s unpack that a bit.

“In 2010, the tenants who were all renting in the building decided to form a cooperative association and purchase it from the landlord, using a low-interest loan from the District of Columbia Department of Housing and Community Development,” explains Eva Seidelman, an attorney with the Neighborhood Legal Services Program in Washington, D.C., who is familiar with the history of this transaction. This loan allowed the tenants to convert the building from rental units to co-ops that would remain affordable for the long term.

As such, anyone who applies to live in this building must fall below the co-op’s maximum income limit: $60,839 for an individual, or $69,530 for a two-person household. Given that the median household income in Washington, D.C., is currently $75,628, that means that people applying to this LEC don’t need to be destitute. Plus, once you’re in the building, if you get a raise that puts you over this limit, that’s OK; you can remain for as long as you like.

The building tenants at 2711 Q St. SE are responsible for paying for all maintenance and repairs to the building. For this unit, the required maintenance fees total $1,000 per month.

Buyers are also not allowed to use financing, and must pay that $1,490 in cash, as well as the broker and transaction fees. Still, when you consider the average price to rent in the area (around $1,900 per month) or own ($570,000 is the median closing price), it’s still a remarkably sweet deal.

Limited-equity co-ops: Real estate’s best-kept secret?

Limited-equity co-ops exist across the country, and the prices vary considerably—but $1,490 is definitely on the very low end. In D.C. in particular, Seidelman says a few thousand people are living in limited equity co-ops in all parts of the district, not just traditionally low-income areas.

So then why hasn’t this place already been snapped up? According to the listing agent, Nicole Sarr, it could be because once she’s whittled away the people whose income is over that threshold, the apartment is small, and in a less desirable neighborhood. Still, it’s hard to deny that this place is still a steal—and a sign that people from all walks of life can actually qualify for affordable housing.

“When I put it on the market, people called me and said, ‘Is this a scam? It’s too good to be true!’” says Sarr. “Everyone has the idea that D.C. is unaffordable, but there are other affordable opportunities like this one.”

Sarr has sold LECs to people from a variety of backgrounds, from recently graduated millennials entering the workforce to State Department staff members to senior citizens.

“They make sense for people who want a stable place to live, the opportunity to be on the board of directors of their organization, and the ability to have a voice in what happens in their building,” says Seidelman. “You can get an affordable place to live that’s not falling apart, in an area with great schools and great transportation.”

The one downside is that the annual appreciation rates in LECs are generally very low—around 3%. As such, selling your place later on won’t make you much money. For example, in a limited-equity cooperative with a 3% appreciation, if you purchased a place for $2,000, after ten years, you’d only be able to sell it for $2,600.

So if you’re looking to build home equity and make a killing once you sell down the road, then an LEC may not be for you. But considering all the money you’d sock away in the meantime, it’s well worth keeping your eyes peeled for these seemingly too-good-to-be-true deals. Because they do exist.

The post Why You Can Buy This Home for $1,490 (No, That’s Not a Typo) appeared first on Real Estate News & Insights | realtor.com®.

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