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I have a house in AZ. I'm going to rent it out for a while, but if prices had continued to increase and I could have made a decent profit I'd have turned around and sold it. But in our development of 92 townhomes, 25 are for sale. 18 of these were built in the final phase of development, meaning they were sold and moved into last summer and into fall. These homes sold for anywhere from $200K to the mid $300K. Almost all of these people listed their house for over $100K of what they bought it for, but now I see almost all of them have dropped their prices to less than $100K over their purchase price. I think I could still make a profit on my house, but with all that competition why even try? I can rent it out and be close to cash flow neutral, then check out the situation in 6-12 months.

I don't know the DC market so don't know how that will compare. I would strong recommend doing as much research as you can, which it sounds like you're doing some of - tracking tax or assessor info, watch for declining prices, number of houses for sale, etc. I like this website for tracking number of houses for sale in "hot" markets:
http://bubbletracking.blogspot.com/

Unfortunately they don't track the DC market.

Some other things to consider. first, if you sell within a year you will pay higher taxes on your profit. If you hold on for a year you'll pay long term capital gains tax, i.e. drop your tax from 28% to 15%. Also, many develops in AZ restrict investors - they will have rules that won't let you rent or sell within a year of purchase, or they can buy it back at the price you bought it for. This is starting to loosen up as the market softens.

dvcnut
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