To calculate a second home in Washington, D.C., start by determining the purchase price, down payment (typically 20% for conforming loans), and closing costs (2-5% of the price). Factor in annual expenses like property taxes (1.2% of assessed value), insurance ($500-$1,500/year), and maintenance (3-5% of the home’s value). Calculate mortgage payments using a 6-7% interest rate for a second home loan, which may require a higher down payment than primary residences. Assess rental income potential (3-5% yield in D.C.) and compare it to expenses. Subtract net rental income from total costs to evaluate cash flow.

The process is critical due to D.C.’s high cost of living and complex tax laws. The median home price in D.C. was $640,000 in 2023, with property taxes averaging $8,000 annually for a $700,000 home, per the D.C. Office of Tax and Revenue. Second homes often face stricter lending criteria, as lenders view them as higher-risk investments, requiring larger down payments (up to 30%) and higher credit scores. For example, a $700,000 home with a 30% down payment ($210,000) and a 30-year, 7% mortgage results in monthly payments of $3,670, excluding taxes and insurance. Rental income yields are modest due to high operating costs; a $700,000 property generating $24,000/year yields 3.4%, below the 4-6% ideal for profitability. Additionally, D.C. imposes a 1.5% transfer tax ($10,500 on a $700,000 sale) and annual recordation taxes ($1,200). These factors necessitate thorough financial modeling to avoid negative cash flow. Data from the National Association of Realtors (NAR) shows 12% of D.C. home purchases in 2023 were investment properties, reflecting cautious optimism despite rising costs.