DSCR Loans in Washington DC: Capital Region Investing

Washington, DC presents a unique real estate market shaped entirely by its primary industry: the federal government. When most cities worry about economic diversification, DC thrives on the opposite—a mono-industry that never goes away, never lays off en masse, and pays consistent, above-average salaries.

This creates unusual dynamics for DSCR investors:

• Recession-resistant rental demand (government doesn't shrink during downturns)
• High-income tenants (median federal salary: $95K+)
• Stable, professional tenant pool (low default rates)
• But: High purchase prices and fierce competition

The DMV Market Structure

"DMV" (DC-Maryland-Virginia) is how locals refer to the greater metro area. For DSCR investing purposes, you need to understand the distinct sub-markets:

Washington, DC Proper

Characteristics:

• Median home price: $680,000-750,000
• Condos dominate (limited single-family stock)
• Strong rent growth (4-6% annually)
• High condo fees ($400-800/month)

DSCR reality: Condos rarely work due to HOA fees. Single-family homes and small multi-family buildings can work, but prices are steep.

Prince George's County, Maryland (PG County)

Characteristics:

• Median home price: $380,000-450,000
• More affordable than DC proper
• Strong African American middle class
• Good public transit (Metro access)

DSCR reality: This is where the numbers start working. More affordable prices, still strong rental demand from government workers.

Montgomery County, Maryland

Characteristics:

• Median home price: $550,000-650,000
• Wealthier, more suburban
• Excellent schools
• Higher property taxes

DSCR reality: Similar challenges to DC proper—good rents, but high prices and taxes make cash flow tight.

Northern Virginia (NoVA)

Characteristics:

• Median home price: $500,000-600,000 (Arlington), $450,000-550,000 (Alexandria)
• Tech corridor (Amazon HQ2, defense contractors)
• Extremely competitive market
• Strong appreciation

DSCR reality: Arlington and Alexandria are difficult. Farther out (Fairfax, Prince William County) offers better DSCR potential.

Where DSCR Loans Work Best

Prince George's County: The Sweet Spot

PG County offers the best combination of affordability and rental demand in the DMV.

Hyattsville / University Park (near UMD and Metro):

• Purchase price: $425,000 (single-family)
• Down payment (25%): $106,250
• Loan amount: $318,750
• Interest rate: 7.25%
• Monthly P&I: $2,175
• Property taxes: $355/month ($4,260/year)
• Insurance: $165/month
• Total debt service: $2,695

Market rent: $2,600
DSCR: 2,600 ÷ 2,695 = 0.96

Close, but not quite. However, if you find a property with a basement apartment (legal ADU):

• Main house: $2,600
• Basement unit: $1,200
• Total: $3,800
• DSCR: 1.41

This works beautifully. Many PG County homes have basement apartments, and the county has been increasingly permissive about legalizing them.

Capitol Heights / District Heights:

• Purchase price: $350,000
• Loan (25% down): $262,500
• Payment: $1,790 + $295 taxes + $145 insurance = $2,230
• Rent: $2,200
• DSCR: 0.99

Right on the edge. With 30% down, you'd achieve 1.05+ DSCR.

DC Proper: Small Multi-Family Only

Petworth / Brightwood 2-unit:

• Purchase price: $750,000
• Loan (25% down): $562,500
• Payment: $3,840 + $785 taxes + $220 insurance = $4,845
• Rent: $2,700 + $2,400 = $5,100
• DSCR: 1.05

Petworth and Brightwood have gentrified significantly but remain more affordable than NW DC neighborhoods like Georgetown or Dupont.

Columbia Heights 3-unit:

• Purchase price: $950,000
• Loan (25% down): $712,500
• Payment: $4,860 + $995 taxes + $280 insurance = $6,135
• Rent: $2,200 + $2,200 + $2,000 = $6,400
• DSCR: 1.04

Tight, but workable. Columbia Heights sits on the Green Line Metro, attracting government workers, Hill staffers, and young professionals.

Fairfax County, Virginia: The Value Play

Farther out in NoVA, prices drop while rental demand remains strong.

Annandale / Springfield:

• Purchase price: $480,000
• Loan (25% down): $360,000
• Payment: $2,455 + $400 taxes + $175 insurance = $3,030
• Rent: $2,800
• DSCR: 0.92

Needs higher down payment or below-market acquisition to hit 1.0.

Townhouse in Woodbridge:

• Purchase price: $420,000
• Loan (25% down): $315,000
• Payment: $2,150 + $350 taxes + $160 insurance = $2,660
• Rent: $2,500
• DSCR: 0.94

Again, close but not ideal. However, Woodbridge and Dale City have seen significant rent growth (5-7% annually) as Amazon HQ2 continues to drive NoVA demand.

The Government Worker Advantage

DC's tenant pool is unusually strong for landlords:

Income stability: Federal employees can't be mass-laid-off. Even during government shutdowns, back pay is guaranteed.

Credit quality: Government jobs require security clearances, which require clean credit. Your tenant pool self-selects for financial responsibility.

Professionalism: Government workers understand lease obligations and typically give proper notice.

Longevity: Federal careers span decades. Tenants stay longer than in transient tech markets like Austin or Seattle.

This affects DSCR investing because:

1. Lower vacancy risk: Budget 5% vacancy instead of 8-10%
2. Fewer evictions: Government workers pay rent
3. Stable rental income: The income lenders use for DSCR calculations is more reliable

Some DC-area DSCR lenders will accept 0.95-0.98 DSCR ratios specifically because the tenant pool is so stable. They know the vacancy and default risk is lower than other markets.

Metro Access Premium

Properties within a 10-minute walk of Metro stations command 15-25% rent premiums.

Example:

• House in Takoma (near Metro): $2,800 rent
• Identical house in Langley Park (no Metro): $2,300 rent

That $500/month difference can make or break your DSCR:

• With Metro access: DSCR 1.10
• Without Metro access: DSCR 0.90

When evaluating DMV properties for DSCR financing, proximity to Metro is critical.

Hill Staffers: High-Demand Renters

Congressional and Senate staffers are an unusual rental demographic:

• High education, low starting pay ($45-60K)
• Need proximity to Capitol Hill
• Often rent in groups (3-4 staffers sharing a house)
• Stable employment (tied to 2-year election cycles)

Capitol Hill house hack example:

• Purchase price: $720,000 (4-bedroom row house)
• Loan (25% down): $540,000
• Payment: $3,685 + $755 taxes + $215 insurance = $4,655
• Rent: $1,000/room × 4 rooms = $4,000
• DSCR: 0.86

Doesn't quite work, but some investors target this market by renting rooms individually (not possible with standard DSCR loans, which require lease-to-tenant documentation).

However, if you find a 2-unit property on Capitol Hill:

• Purchase price: $850,000
• Loan (25% down): $637,500
• Payment: $4,350 + $890 taxes + $250 insurance = $5,490
• Rent: Unit A (4 staffers × $1,000): $4,000
• Rent: Unit B (2-bed): $2,200
• Total rent: $6,200
• DSCR: 1.13

Now it works. Multi-family is key in DC proper.

DMV Property Tax Variations

Property taxes vary wildly across the DMV:

DC: ~0.85% effective rate
Montgomery County, MD: ~1.05-1.20%
Prince George's County, MD: ~1.10-1.25%
Arlington, VA: ~0.95%
Fairfax County, VA: ~1.10%
Prince William County, VA: ~1.15%

These differences significantly impact DSCR:

Same property, different jurisdictions:

$500,000 purchase price, $2,600 rent

DC taxes ($4,250/year = $354/month):

• Total payment: $3,920
• DSCR: 0.66

Fairfax taxes ($5,500/year = $458/month):

• Total payment: $4,024
• DSCR: 0.65

Not a huge difference, but it matters at the margins.

What You'll Need to Qualify

DMV DSCR lenders typically require:

Credit score: 660+ (680+ for competitive rates)
Down payment: 20-30%
Reserves: 6-12 months
Property: 1-4 units, habitable condition
Rent documentation: Current leases or appraisal

Interest rates (Feb 2026):

• 1.25+ DSCR: 6.75-7.25%
• 1.0-1.24 DSCR: 7.25-7.75%
• 0.75-0.99 DSCR: 7.75-8.5%

Closing costs:

• DC: Recordation tax 1.45% + transfer tax 1.45% = 2.9%
• MD: Transfer/recordation combined ~1.5-2%
• VA: Grantor tax 0.25% + recordation ~0.33% = ~0.6%

Virginia has significantly lower closing costs, making it more attractive for high-volume investors.

Successful DMV DSCR Strategies

Strategy 1: The PG County Multi-Family Play

Buy 2-3 unit buildings in Hyattsville, College Park, or Greenbelt. Target properties near Metro or UMD.

Typical deal:

• $500,000 purchase
• 3 units × $1,800 = $5,400 rent
• Payment + taxes + insurance: $4,200
• DSCR: 1.29

Cash flow $1,200/month, use proceeds to acquire second property within 18-24 months.

Strategy 2: The Basement ADU Conversion

Buy a single-family in PG County with an unfinished or illegal basement. Purchase price reflects the current state.

• Purchase: $380,000 (as-is, basement not counted)
• Renovation: $40,000 (legalize basement, add kitchen/bath)
• New value: $460,000
• New rent: $2,400 (main) + $1,300 (basement) = $3,700

Refinance 6-12 months later:

• New loan (75% LTV): $345,000
• Payment: $2,700
• DSCR: 1.37

Pull out most of your renovation capital, repeat process.

Strategy 3: The NoVA Appreciation Hold

Buy in Prince William or Loudoun County at current DSCR of 0.90-0.95 (requires 30% down or lender flexibility).

Accept slight negative cash flow ($100-200/month) in exchange for:

• 5-7% annual appreciation (driven by Amazon HQ2, data centers, federal contractors)
• Principal paydown from rental income
• Future refinance opportunity as rents rise

After 3-5 years, refinance into better terms as the DSCR improves organically.

Strategy 4: The Section 8 Stability Play

Prince George's County has strong Section 8 demand. Voucher holders are government contractors, service workers, and retirees.

Section 8 in PG County pays 120-130% of market rent for quality properties.

• Market rent: $2,000
• Section 8 rent: $2,400

That extra $400/month turns a 0.95 DSCR into a 1.15 DSCR.

Trade-offs:

• More inspections
• Paperwork
• But: guaranteed rent, government-backed payment

DC vs. Suburbs: DSCR Comparison

DC Proper:

• High prices ($650K-1M+)
• Best appreciation (5-7%)
• Difficult DSCR (0.8-1.0)
• Multi-family required

PG County, MD:

• Moderate prices ($350-500K)
• Good appreciation (4-6%)
• Strong DSCR (1.0-1.3)
• Best for cash flow

Montgomery County, MD:

• High prices ($550-700K)
• Good appreciation (4-6%)
• Difficult DSCR (0.85-1.0)
• Wealthier tenants

NoVA (Arlington/Alexandria):

• High prices ($500-650K)
• Strong appreciation (5-8%)
• Difficult DSCR (0.80-0.95)
• Tech sector growth

NoVA (Outer counties):

• Moderate prices ($400-550K)
• Good appreciation (4-6%)
• Workable DSCR (0.95-1.15)
• Commuter demand

For pure DSCR cash flow: PG County wins.
For appreciation + acceptable DSCR: Outer NoVA counties.

Political Risk Considerations

Unlike other markets, DC has unique political risk:

Federal hiring freezes: New administrations sometimes freeze federal hiring, temporarily cooling rental demand.

Administration changes: When a new president takes office, thousands of political appointees turn over. Some move to DC, others leave.

Government shutdowns: Temporary (but recurring) events that can stress tenants financially.

However: These risks are overstated. The federal workforce is 85% non-political career employees who stay regardless of administration. Shutdowns always result in back pay.

DSCR lenders familiar with the DMV understand this. They know that DC's government-driven economy is actually more stable than private-sector-driven markets during recessions.

Should You Use DSCR Loans in DC?

Yes, if:

• You're targeting PG County multi-family
• You're buying small multi-family in DC proper
• You have 25-30% down payment
• You value tenant quality and stability
• You're comfortable with moderate appreciation (not CA/FL levels)

No, if:

• You're buying DC condos (HOA fees kill DSCR)
• You're targeting expensive single-family in DC/Arlington
• You need immediate high cash flow
• You're buying in outer suburbs with weak transit access

The Bottom Line

The DMV is a stable, professional real estate market perfect for buy-and-hold DSCR investors.

You won't get Austin's explosive growth or Miami's sexy appreciation. But you'll get:

• Recession-resistant rental demand
• High-quality tenants
• Steady 4-6% appreciation
• 1.0-1.3 DSCR ratios (in the right locations)
• Lower volatility

The typical successful DMV DSCR investor:

• Focuses on PG County or outer NoVA
• Buys 2-4 unit buildings
• Targets Metro-accessible locations
• Holds 10+ years
• Builds portfolio slowly but steadily

This is not a get-rich-quick market. It's a build-wealth-reliably market.

And for DSCR investors who value stability over speculation, that's exactly what you want.