If you’re thinking about a real estate investment in the near future, Richmond, Virginia is a promising region in southern Virginia that is worth your time, money, and consideration.
In this exhaustive guide, we’ll cover everything you need to know about investing in real estate in Richmond, VA. To start, we’ll give an overview of the region - who lives there, what drives their economic success, and what gives them such a rich cultural identity. Then, we’ll take a closer look at the real estate market itself - specifically, how to find the best properties, and what to look for in your ideal neighborhood. Finally, we’ll explore how to maximize profit on your real estate investment, and how to identify a worthy financial partner.
This article is perfect for people preparing for their first real estate investment in Richmond, VA and by the time you’re done reading, you’ll have learned everything you need to know to get underway with your first successful project.
Richmond, Virginia: An Overview
To start, we’re going to give a quick overview of Richmond, Virginia to give you an idea of why it has become so attractive to real estate investors over the last few years.
Founded in 1742, Richmond is a state capital rich in history, and with a culture hundreds of years in the making. The metropolitan area is currently home to more than a million residents, and its neighborhoods range from historic to hip to emerging hotspots.
Richmond is one of Virginia’s economic powerhouses, with work opportunities ranging from cornerstone sectors like law and finance to emerging sectors like biotech and medical research.
Home to the US Court of Appeals for the Fourth Circuit and the Federal Reserve Bank of Richmond, law and finance are deeply embedded cornerstone industries that have contributed to the city’s growth for centuries.
The greater metropolitan area is also home to the headquarters of eight Fortune 500 companies, with several more having satellite offices in the region. Other notable and fast-growing industries include advertising, food and hospitality, film and television and craft beer and liquor.
Richmond’s culture is one steeped in a rich history, and that has continued to evolve with each generation of modern influence - the perfect convergence of the old and the new.
If you’re a fan of US history, there are few locations better than Richmond to immerse yourself in America’s storied past. The city is home to hundreds of museums, monuments, battlegrounds and memorials commemorating moments of historical significance over the last 300+ years. This history dovetails nicely into Richmond’s appreciation for arts, theater, and literature, all of which have deep and longstanding roots in the city.
Richmond is not without its modern charms, either. You’ll have no trouble finding micro breweries and distilleries spread amongst the area’s many up-and-coming neighborhoods. The city has also become an emerging hotspot for foodies interested in experiencing it’s modern adaptations of traditional southern classics.
The Real Estate Market of Richmond
Now that we’ve covered the basics of Richmond, we’ll take a deeper dive into the real estate market and how it’s positioned to deliver profit to scrupulous investors.
Finding the Right Property
Finding the right property for a real estate investment in Richmond goes far beyond the property itself - you need to consider the neighborhood as a whole. In this section, we’ll outline what you need to look for (and what you should avoid) in order to find the perfect property.
Finding the Right Neighborhood
When considering a real estate investment, there are always a few things you should investigate about the neighborhood before you even think about buying a piece of property.
First, one of the easiest ways to expand your potential audience of buyers is to take a look at the local school system. Many growing families will be thinking about their children, and will need educational options that will set them up for success later in life. The key here is to identify neighborhoods with good schools, not necessarily the best schools - neighborhoods with the best schools don’t usually have properties with as much upside potential, as they’ll already be expensive and won’t fit the ideal investment profile. Whatever the case, just make sure the neighborhood has a good option for schools, or at the very least, a good alternative like private schools or charter schools.
Next, consider the commuter: Make sure your neighborhood is close to a metropolitan area where potential buyers may work, and that there are viable options for their commute. For example, while Richmond is unique in that it doesn’t have a subway system, the city has been steadfastly committed to creating a superior BRT (bus rapid transit) system that remains ever-growing - identifying properties that lie along its current or future routes is a great way to ensure a convenient commute for your future buyer. Of course, the perfect commute might be tough to find, but like all things flipping, it’s about striking the perfect balance between price and perfection.
Finally, look for a neighborhood with a mix of new and older homes. This ensures that there’s a steady stream of investment from other flippers, buyers, or development companies - and acts as a litmus test for the velocity of trade in the neighborhood (i.e. the balance of supply and demand for good properties). The mix of old and new ensures that, while people are actively investing in the neighborhood, there are still opportunities for profit for the intelligent investor.
In short, when it comes to real estate investment, location is everything. It determines quality of schools, length of commute, property value, crime rate… the list goes on. Even the right property in the wrong location won’t be worth your time or money, so never skip this step.
What to Remember When Looking at Historic Homes
When looking at properties in Richmond, it’s important to keep in mind that some of the neighborhoods you’ll be looking at are older - meaning you might end up seriously considering buying an historic home.
On the upside, historic homes offer an opportunity to revitalize a home to its former greatness, and to contribute to the rich historical fabric of a community. They often contain features that you simply cannot find in modern constructions, and have that certain je ne sais quoi that many buyers are looking for. In other words, a house with “character”.
On the flip side, it’s important to recognize factors that might contribute to higher costs for a fix and flip investment. Older homes might require updates in electrical systems or plumbing just to get them to pass an inspection. Making these houses more comfortable to live in can also be an investment, whether it’s making them energy efficient or even just cosmetically appealing for today’s buyer. Finally, be sure to know your local regulations on historic homes, as some municipalities tightly restrict the work you’re allowed to do on them - doing your homework ahead of time can keep you from making a very costly mistake.
For any real estate investment, it’s always important to find neighborhoods that are undergoing growth and transition. Luckily, Richmond is full of zip codes that are ripe for fix and flip success. In fact, WalletHub recently named a number of cities within the region that are among the top 150 for fix and flip investors: Richmond, VA came in at #77.
Foreclosures can offer a cheaper way to get your foot in the door when investing in real estate. While there are many red flags to look out for when investing in real estate, it’s important to be able to identify when, and more importantly why, you’re getting a great deal on a foreclosure.
The truth is, more often than not, they’re the result of a lack of due diligence on the part of the investor. In cities like Richmond, there are a ton of deals to be had on foreclosure properties, and wise investors should always take a closer look if they don’t want to miss out on the potential for bargain prices.
For a city like Richmond, this can be a massive opportunity: If you can find a foreclosure in a good neighborhood, you’re getting access to a city with strong income growth, low unemployment, and steady home value appreciation - all for a below-market-value price tag.
While by no means required when purchasing property, foreclosures are a good way to get a great deal on the property of your dreams.
Building the Best Property at the Lowest Cost
When it comes to finances, there are two main considerations to maximizing your bottom line, both of which we’ll cover in this section:
- Increasing your home value for the lowest possible cost, and
- Partnering with the right hard money lender to set yourself up for success.
Increasing Home Value at the Lowest Possible Cost
Maximizing your bottom line is the name of the game when it comes to real estate investment in Richmond (or anywhere for that matter) - so to save you the hassle, here are some of the easiest ways to save money on that next project.
Getting the Right Contractors
Choosing a contractor in Richmond can be a difficult task, whether you’re a beginner investor or a fix and flip pro.
Start with word-of-mouth. If you’ve worked with other contractors in the past, ask them for referrals for quality contractors in the area. Ask friends, family, or fellow investors who they’ve worked with, and whether they were right for the job. If you don’t have the network to lean on, that’s fine, too - take to the internet and look for the contractors that’s right for the job. Google, Yelp!, and Angie’s List are just a few of the places you can check for ratings and reviews on potential candidates for the job.
Once you’ve put together a list, you’ll want to narrow it down a bit. First, talk to the contractors to see how they do business - make sure they’re above board and won’t use any underhanded practices to get the job done. Check their licenses to make sure they’re qualified, active, and in good standing with the city.
Finally, once you’ve narrowed your list down to the final candidates, get some competitive quotes, and meet with the most viable one. If you’re happy with what you see and hear, you’re ready to move forward with the job.
If you’re thinking about renovation (or even a new construction, for that matter) in Richmond, there are a few key considerations to increasing the value of your property that you won’t want to skip.
To create an enticing home, the best place to start is with curb appeal - steps like simple landscaping, a fresh coat of paint, or even just a new front door can be the easiest way to draw potential buyers into the home. Just make sure these cosmetic changes match the aesthetic of the neighborhood, and can appeal to a broad audience.
On the inside of the house, you’ll want to focus on high-value, high-traffic areas of the house - namely, the kitchen, bathrooms, and even the basement (if you plan on making it a livable space, that is). Focus on low-cost, high-impact changes - for example, adding new fixtures and energy efficient appliances will help to maximize the value of your kitchen.
Finally, keep up with the times by adding a few technical touches. You don’t have to break the bank to nail this step - for instance, smart thermostats, keyless entry, and USB ports on the outlets are three simple ways to make your house appear modern, without the huge price tag.
Getting the Sale
Once the renovations are done and you’re ready to put your house on the market, it’s important to consider whether you’d rather hire a realtor or list the property yourself.
There are pros and cons to each. The benefit of listing yourself is saving the ~2-3% fee associated with a listing agent (though you’ll still be responsible for the fee of the buying agent).
The benefits of hiring an agent, on the other hand, are multiple, and depending on your situation, may justify the cost:
- Increased reach via online listing tools that are only available to licensed agents
- Shorter timelines on negotiation and closing (time is money!)
- Knowledge of neighborhood and strong network
- Familiarity with the business
Whatever you decide, the most important thing is to recognize the trade-offs and pick the solution that’s best suited to your individual needs as an investor.
Finding a Hard Money Lender in Richmond
In addition to maximizing your profits during the actual “fix” phase of the fix and flip, another easy way to set yourself up for financial success is by working with a hard money lender who both understands your needs and offers financial products that can address them.
Figuring Out Which Financial Product is Right for You
Before breaking ground in Richmond, you’ll need to figure out which financial product meets the needs of your investment plan. Most hard money lenders offer a wide variety of financing options, each one built for a specific type of real estate investment project.
For example, fix and flip loans can be convenient because they offer an extremely short close time, meaning you can get to work on your project almost immediately. Construction loans are useful for any real estate investment project involving new construction, and similar to fix and flip loans, are paid in installments as the various stages of work are completed.
Finally, it’s important to consider the common misconception that higher-rate lenders means a higher out-of-pocket expense for borrowers - this is not always the case. It’s important that borrowers not disqualify lenders based on rate alone, and instead that they have a direct conversation to seek out a financing plan that works for both parties.
Whichever product is right for you, it’s important you also select a lender that understands your needs and goals.
To set your investment up for success, you’ll want to work with a hard money lender that’s familiar with the area. What is a hard money lender? An individual or company that lends money directly to the borrower in the place of a bank. Picking the right lender can be the make-or-break factor on your project’s success, so you’ll want to find a partner who understands your needs and goals as a borrower.
Hard money lenders like Walnut Street Finance offer benefits like shorter close times, easier qualification, and flexible rates. If you’re considering an investment in Richmond, be sure to check out our financial offerings to see if we have products that can meet your project’s needs.
Well, that’s it - everything you need to know about investing in real estate in Richmond, VA.
If you’re interested in getting started on a real estate investment project in the area and need a financial partner, consider reaching out to Walnut Street Financial to learn how we can work together to help you achieve your investment goals.
Or, if you’d like to learn a little more about how to break into the world of real estate investment, check out our free ebook Building Your Real Estate Empire: Borrower Basics 101 to start growing your wealth.