Did this deal require basement legalization?

No — property was already configured as legal upper + main floor units. Scope focused on systems and finishes, not egress conversion.

What hard money leverage funded the deal?

85% LTC on $498,000 acquisition with $91,500 rehab in draws tied to DOB rough and final inspections.

What DSCR refi terms closed the hold exit?

74% LTV on $685,000 appraised value — $506,900 permanent debt at 8.50% with $3,900/mo gross supporting ~1.13 DSCR.

Why not legalize an English basement on this row?

Upper/main configuration stabilized in 9 months vs 14+ for Kenyon-style basement plays. All-in $589.5K cleared ratio without $72K+ conversion scope.

Columbia Heights Two-Unit DC Case Study

Item: Jaken Finance Group
Rating: 5
Author: Verified Borrower

Deal snapshot

Location	Columbia Heights, Washington, DC
Property type	20010 rowhouse (legal two-unit — upper + main, no basement conversion)
Loan type	Hard money bridge → DC DSCR hold
Loan amount	$503,250 bridge (85% LTC)
Close time	10 business days

Investor challenge

A repeat DC sponsor targeted a 14th Street corridor rowhouse — legal upper + main configuration (no basement conversion), one unit vacant, dated systems. Banks wanted seasoning on purchase price before lending against renovated value. Compared to Kenyon Street basement legalization plays (heavier scope on the Columbia Heights hard money page), this file prioritized faster stabilization over maximum unit count.

Jaken Finance Group’s solution

85% LTC at 10.75% IO with 12-month term and milestone draws aligned to panel upgrade, kitchen/bath completions, and two-unit CO. TOPA did not apply — both sides vacant at closing. The 1.45% DC deed recordation tax was modeled in carry before term sheet.

Outcome

Stabilized gross rent: $3,900/mo ($2,250 upper + $1,650 main)
Appraised value at refi: $685,000
DSCR refi: 74% LTV → $506,900 @ 8.50% — recovering acquisition equity and ~$48,000 of rehab capital

DC hub: investment property financing Washington DC · DSCR Washington DC

Acquisition

Purchase: $498,000 · Day 10 close
Hard money: 85% LTC · 10.75% IO · 12-month term

Rehab scope

Item	Cost
Upper + main kitchen/bath gut	$42,000
Electrical panel + HVAC service	$24,000
Hardwood refinish + paint	$14,000
DOB violation cure (minor)	$11,500

Total rehab: $91,500 · All-in: $589,500

Hold exit (executed)

Gross rent: $3,900/mo
Appraisal: $685,000
DSCR refi: 74% LTV → $506,900 @ 8.50%
DSCR ratio: ~1.13 at opex modeled for DC rent control

Why upper/main beat basement legalization here

Basement conversion adds $72K–$95K and 4–6 months — right for Petworth thesis, wrong when 14th Street upper/main comps already support ratio at $589.5K all-in. Takeaway: match Columbia Heights scope to legal configuration at acquisition, not every rowhouse needs an English basement.

14th Street vs Kenyon — why this file was faster

The sponsor passed on a Kenyon Street row with illegal basement at $565K — modeled $175K legalization scope and 8-month DOB path on the Columbia Heights hard money page. The 14th Street upper/main file traded $67K higher acquisition for $83.5K lower rehab and 4 fewer months to stabilization:

File	Acquisition	Rehab	Months to refi	Gross at refi
Kenyon basement play	$565,000	$175,000	~14	$4,600/mo
14th St upper/main (this deal)	$498,000	$91,500	~9	$3,900/mo

Permanent-debt exit was the goal — time to ratio beat maximum unit count.

Project timeline

Milestone	Week
Hard money close	Week 1
Panel + rough electrical sign-off	Week 4
Upper + main kitchens complete	Week 12
Two-unit CO issued	Week 22
Both units leased	Week 24
DSCR refi closed	Week 28

Draw releases tracked DOB rough and final — no cosmetic draws without inspection photos.

Recordation and refi friction

DC deed recordation on the $498,000 purchase ran 1.45% — about $7,221 — under D.C. Code § 42-1103. That rate is 1.1% plus a 0.35% add-on for residential deeds of $400,000 or more.

The cash-out refi did not add a second recordation charge. A deed of trust on Class 1A or 1B residential property with five or fewer units is exempt under § 42-1102(21), with the required affidavit attached. Sponsors who budget a refi recordation tax on a two-unit row overstate hold costs.

The friction that does matter on exit is the seller’s transfer tax. Under § 47-903 it is imposed on the transferor at 1.1%, plus 0.35% on residential sales of $400,000 or more. On a $725,000 sale that is about $10,513.

What would have killed this file

Basement conversion scope added mid-project — would have blown 12-month hard money term
1007 using Petworth basement rents on upper/main configuration
Occupied upper at closing — TOPA would have added 60–90 days before full rent roll counted
Underwriting year-two rents as if the LLC qualified for DC’s small-landlord rent control exemption — it does not, because the exemption requires natural-person owners
Budgeting a recordation tax on the refi deed of trust, which shrinks the cash-out estimate for no reason

Operator lessons

Comp discipline: Appraisal pulled three renovated two-unit rows on 14th Street between Irving and Monroe — not DC metro DSCR Capitol Hill premiums or Park View basement comps. Lease file: Both units on 12-month terms matching 1007 — no month-to-month at refi. Entity: LLC vesting completed before appraisal order — DC refi files delay when vesting docs arrive late.

Insurance bind: Landlord policy quoted $2,400/yr higher than sponsor pro forma on 1900s row — underwriter accepted bound quote; budget +15% on vintage DC stock at LOI.

Permanent debt vs sale after rehab

Modeled $725K flip on $589.5K all-in netted ~$18K after purchase recordation, the seller’s transfer tax, commission, and 9-month carry — sponsor chose $506.9K refi to retain $3,900/mo gross and extract ~$48K rehab equity. DC row sponsors often undervalue hold when flip ARV looks attractive on paper but tax on both the purchase and the sale erodes net. Hard money term was 12 months with one 60-day extension unused — scope matched legal configuration at acquisition. Both units on 12-month leases at refi — no month-to-month tenancy heading into year two of the hold. DOB violation cure ($11,500 line) closed before kitchen rough — sequencing compliance before finish is standard on 20010 acquisition files.

DC rules that follow an LLC-owned two-unit row

The sponsor bought in an LLC, which changes how two DC tenant laws apply. Both shape the hold and the eventual sale.

Rent control coverage

DC’s rent stabilization law exempts small landlords only in a narrow case. Under D.C. Code § 42-3502.05(a)(3), the exemption covers housing with 4 or fewer rental units owned by not more than 4 natural persons. An LLC is not a natural person, so an LLC-owned row does not qualify through that route.

The same section exempts units in buildings permitted after December 31, 1975. It also exempts newly created units added to an existing structure under a housing certificate of occupancy issued after January 1, 1980. A turn-of-the-century row with long-standing upper and main units usually does not fit either path. Confirm coverage with the city’s rent administrator rather than assuming.

For covered units, § 42-3502.08 limits a standard annual increase to the general CPI adjustment plus 2%, with a hard cap of 10%. Elderly tenants and tenants with a disability have a separate, lower limit. That is why this file underwrote rent growth conservatively and did not count on mark-to-market jumps after year one.

Buying with both units vacant kept TOPA out of the acquisition. The exit is different. § 42-3404.10 covers 2–4 unit accommodations owned in majority by a business entity. If the sponsor sells while tenants are in place, the statute gives them:

Step	Minimum time
Tenants acting jointly send a statement of interest	15 days after the offer of sale
Individual tenant statement if no joint response	7 days after that
Negotiation period after a letter of intent	90 days minimum
Time to secure financing after contracting	90 days minimum, longer if a lender estimates up to 120 days in writing
Owner must re-offer if no sale or contract	after 240 days

The section excludes “2-unit single-family accommodations,” which is a defined term in the statute. Have DC counsel classify the property before you set a sale date. For a sponsor planning a sale in year three, the practical step is simple. Either time the listing to a vacancy or add up to eight months to the exit calendar. See the DC TOPA and DOB compliance guide for the filing steps.

Tax lines in dollars

Line	Rate or rule	On this file
Property tax, Class 1B (2 or fewer units)	$0.85 per $100 on the first $2.558 million of assessed value, per DC OTR	About $5,823/yr ($485/mo) if assessed at the $685,000 appraised value
Purchase deed recordation	1.45% at $400,000 and up	About $7,221 on $498,000
Refinance deed of trust	Exempt for 5 or fewer residential units, with affidavit	$0
Seller transfer tax on a future sale	1.45% at $400,000 and up	About $10,513 on a $725,000 sale

The assessment rarely matches the appraisal in the first year. Pull the current assessment from the OTR record and stress the tax line at appraised value anyway. DSCR underwriting will often use the higher number.

Fall 2026 numbers for a Columbia Heights replay

A sponsor copying this file today faces a softer citywide listing market. Realtor.com data on FRED shows DC’s median listing price at $527,500 in September 2026, down from $589,000 a year earlier (MEDLISPRI11001). Median days on market rose to 58 from 52 (MEDDAYONMAR11001).

Rent benchmarks held up better. HUD’s FY 2026 Small Area Fair Market Rents for ZIP 20010 are $2,130 for a one-bedroom and $2,370 for a two-bedroom. The upper unit’s $2,250 sits between those two figures. The main unit’s $1,650 is well under the one-bedroom benchmark.

Read together, the numbers favor the path this sponsor chose. Falling list prices and longer marketing times squeeze a flip exit. Rents at or under HUD’s ZIP-level benchmark give the appraiser room to support the 1007 rent schedule. If your scope or unit mix differs, rerun the ratio with the DSCR loans Columbia Heights parameters before committing to a refi target.

Pre-1978 paint and permits

A row of this age almost certainly has lead-based paint under later layers. Draw schedules should allow time for lead-safe work practices and clearance before units are re-leased. The DC lead paint investor guide covers the city’s rules. Budget that time before the lease-up date, not after.