Help! I've fallen in love with a long-distance MFH! What's my next step?
Rental Property Investor · Glen Arm, MD · Member since 2015 · 105 posts · 41 votes
Hi BP colleagues!
I'm relocating to Baltimore from Los Angeles in June/July and I found a triplex online that I've fallen for.
It is:
Plus, it has a huge fenced backyard for my dogs (also rare to find)
The numbers are all laid out right here:
http://www.benfrederick.com/assets/properties/Elm3...
So, being the impulsive sort that I am, I want to put in an offer from a distance. But I'm not scheduled to go back to Baltimore until mid-July. I'm nervous that this is the "one" and it might be gone by then.
It's already been under contract twice in two months (fell out once for financing and once for timing of the leases not lining up with an investor's rehab plans).
What's my next actionable step? Would I be crazy to put in an offer sight unseen? Or should I listen to my gut and go for it, knowing that if something crazy comes up during escrow I can always bounce?
Any hard-won advice is much appreciated! Thank you!
--Julie
I smell a rat in the comps. All of his comparables are in Charles Village, in zip code 21218, across Wyman Park to the east of Hopkins University Homewood campus. Elm Street is in Hampden, in zip code 21210. Strange that he does not state the zip code on his analysis sheet--that is kinda basic information, especially for a buyer from out of state.
Because he is comparing two very different neighborhoods, what you have here is a misrepresentation of the value of the property of interest.
Hampden historically was a working-class neighborhood of small, often labyrinthine attached wood and brick houses. In the last couple of decades people have expanded and updated many of the homes and sort of schlepped the neighborhood into the middle class. But it retains its eclectic, piecemeal, down-at-the-heels charm, which is part of the fun. I'm fond of it. But Charles Village it's not.
Here is your 3631 Elm Ave: https://www.google.com/maps/place/3632+Elm+Ave,+Ba...
Charles Village is full of large sturdy 3-4 story brick townhouses, many of which have been converted to small multiunits that house Hopkins students. Along Charles Street overlooking the park and Baltimore Museum of Art the housing stock is lofty and patrician, not unlike uptown 5th Avenue across from Central Park in NYC.
https://www.google.com/maps/@39.326861,-76.617764,...
Here is 3202 Guilford Ave., one of the comparables in the analysis.
https://www.google.com/maps/place/3202+Guilford+Av...
You see the difference? The two neighborhoods are not alike at all. It's not unusual at all to pay in the $300s for Charles Village multis, but in Hampden? For that price you get a high-quality rehab (i.e. no oil-fired boiler), central air, lead-free certification, new roof, modern kitchens and baths and nice gardens and views. Also do you know anything about the other tenants--and whether you want to live downstairs from them? Read through the comments of @Seth Sherman and commit them to memory.
BTW, I don't think it's illegal for a listing agent to represent a buyer in Maryland, as long as all parties are informed and sign a dual agency agreement. But it's almost never a good idea, for all the reasons named above, particularly by @K. Marie Poe. And frankly, I believe it would not be in your best interest to work with the agent that produced this analysis.
Yay for you that you looked before leaping, and consulted with the BP community. I wish I had done that the first time I bought a rental.
Regards,
Nancy Roth
Are you sure this is a good deal? I looked at the numbers and unless you get this for a lot less than the asking price, I don't see the value. The comp on Calvert that is closest in price and square footage to this property has rents for $1,000 more than you would be getting and it also went for $300K. With rents for this property at less than $2K, I'd pass on this..
Jai and Sandra, thanks for contributing!
Sandra, can I ask where you are seeing that rents are $1K more on Calvert?
I'm seeing that Elm is bringing in $3,092/mo and Calvert is bringing in $2,935/mo.
My goal with this particular property would be to live there and pay little to no mortgage. From the spreadsheet, it looks like I could reasonably expect to pay $200-$300 per month after all expenses, including budgeted maintenance, if I took over the unit that's currently generating $1K per month.
But if I am missing something, please call my attention to it!
Thanks again!
Hey @Julie Hassett,
The numbers seem good to me, I don't see what @Sandra Holt is referring to either.
The two details that stand out to me are, it doesn't seams right they are adding Oil Heat paid by tenants into GRM calculation, and the closing cost of 15K seam high.
Ha, good thing you asked about the rents! I did a quick calculation and didn't include one of the rents on the property in question, so you're right, I was off. So with your rents at near $3K, the numbers do make a lot more sense.
With that said, I'd follow the recommendation of other investors and see the property yourself. The neighborhoods in Baltimore vary street by street and although Hampden is typically a nicer part of the city, "nicer" is subjective.
Another idea if you don't want to go through a realtor or come down earlier than you planned, is to pay someone (maybe someone from BP) to go to the house and take a lot of pics for you so that you "virtually" see it. Or you could pay an inspector or contractor to take the pics and also check out the property for what repairs need to be done.
Thanks for your input, Terry and Seth!
Terry, I'll look into those closing cost figures. Would the oil heat fit into the GRM calc if it's kind of a "reimbursement type situation" where landlord pays and then tenants reimburse?
Seth, I've been in touch with a Baltimore realtor on BP who specializes in investment properties. I could enlist him to rep me.
I have a friend who never uses his own agent and always jumps on board with the listing agent when he buys properties, because then the listing agent is doubly interested in getting the deal done when he doesn't have to split commissions. Is that considered conflict of interest or just smart business?
Typically, I wouldn't ever ask the listing agent to also represent me unless I see the house with my own eyes first. That way, I know exactly what I'm getting into.
What you could do though, since I've seen this particular listing agent's name a lot, is ask BPers in the area if they know of this realtor and if he's on the up and up. If so, I'd feel better about getting him to represent you, if that's what you want to do.
@Julie Hassett I think is some advantage to using the listing agent. I do this as well, but you do need to do your own homework (but you probably should either way). The listing agents tends to know more about the property and is more motivated to close the deal.
Finding an agent to work with that was truly "on your team" would probably be best... but I've yet to find one of those.
Thanks for your input, Terry and Seth!
I have a friend who never uses his own agent and always jumps on board with the listing agent when he buys properties, because then the listing agent is doubly interested in getting the deal done when he doesn't have to split commissions. Is that considered conflict of interest or just smart business?
I always use the agent that told me about the property.
If I find a property myself I always use the listing agent.
I find using the listing agent you are far more likely to get an offer accepted on a competitive property!!
My sister is studying for her Maryland real estate license right now and she just informed me that it's illegal in MD for a listing agent to also rep the buyer. So, that plan is out the window!
conflict of interest, listing agent doesn't represent your interests. you wouldn't hire the prosecutor to be your defense attorney in the case he's prosecuting??..same idea. further, the seller is paying the 5 percent regardless and is the one to make the decision, not the listing agent. if the listing agent gets the entire commission or half doesn't benefit the seller in any way. You would be a fool not to have your own agent, especially when buyers dont pay the agent commissions.
As far as the house and street, elm is a good street in the heart of Hamden, no concerns with the block or location. I have 2 houses in Remington. 1 in Charles village, all a stones throw from you. one Remington house id even be willing to sell you for far less than 300k if interested, than you wouldn't have to deal with any of the tenant nonsense.
If I were you, I would look in depth into the numbers and being a landlord, as a long time landlord, I would tell you that paying 100k per 2 bed apartment needing work (even in Hamden) is rather pricey, and id be willing to bet that the listing agent knows that also. if the place were ready to go/updated, different story....bet your potential tenants will know that also. keep in mind, being a landlord means you will have to do at least the following:
1. lead certs (an annoying expensive hassle every time a tenant changes over) or you could go lead free, prepare for that expense.
2. rent court/evictions (might happen)...rent the movie pacific heights
3. repairs/maintenance....particularly in an older building already needing some work.
4. water bills....Baltimore city government's version of rape....prepare to pay every bit of 500 a quarter in a place like that, more if you have boilers
And most of all YOU WILL BE LIVING AMONGST YOUR TENANTS. think of all the potential hassles that may present for you.
baring the warnings, the house is in a good location, will rent easily if its clean and functional, and will appreciate to some extent over time. rent probably wont be a very big deal to get from people renting in this area, particularly at those rental prices. very important to know the functional condition of this property, particularly its functional systems (plumbing, electric, hvac, roof) and know exactly what being a landlord means. you will be doing work to earn that rent every month.
I would go see it. You will be living there and it is also about how it works for you. Location, commute, etc. A LA to DC flight is small $ relative to what you are thinking of spending. I have a recent acquaintance who bought a house in floridathey had a friend view and the neighborhood is making them crazy. You could not see some things that were important to them in pictures. You never know.
and know exactly what being a landlord means. you will be doing work to earn that rent every month.
Thanks, Seth! The eternal optimist in me needs a reality check from time to time! :)
Thanks for your input, Terry and Seth!
Terry, I'll look into those closing cost figures. Would the oil heat fit into the GRM calc if it's kind of a "reimbursement type situation" where landlord pays and then tenants reimburse?
Seth, I've been in touch with a Baltimore realtor on BP who specializes in investment properties. I could enlist him to rep me.
I have a friend who never uses his own agent and always jumps on board with the listing agent when he buys properties, because then the listing agent is doubly interested in getting the deal done when he doesn't have to split commissions. Is that considered conflict of interest or just smart business?
Read your last paragraph again. Listing agents are doubly interested in closing......at whose expense? You are not in a position at this point to let a listing agent represent you. Dual listing agreements are not for newbies who have "fallen in love with the property". Seriously, you're every listing agents dream.:) You need a buyer's agent.
The electric an $20/mo makes no sense to me. Is that per unit? Even that seems low if you've got electric stoves in each unit.
You really need to visit the property. You're considering moving into a property and living in close proximity (and below!) to people you don't know.
You need to get a feel for the set-up. You need to check the noise levels from the unit above and from the hallway/stairs as tenants pass by your unit. What's the laundry set-up, if any? Is it in the basement? Do tenants have access to the basement? To the yard?
Buying these kind of things is a lot like being in a dysfunctional relationship. Whoever lets their love show the most loses.
The only way to win is to always be postured to look like you're going to walk away.
@Julie Hassett, if you are reluctant to fly out and take a look at the property yourself, I would suggest taking @Sandra Holt's advice and seeing if you can't get someone to look at the property for you. That can mean someone on BP, a random friend or relative, someone you pay off of Craigslist, or an agent (I would ask for recommendations on BP). Make sure they take lots of pictures. If they aren't knowledgeable about REI, give them a list of things you would like pictures taken of and have them take notes on the surrounding neighborhood.
If you really think this is "the one" and you will be living in it, I suggest you fly out and take a look if at all possible.
Good luck!
I smell a rat in the comps. All of his comparables are in Charles Village, in zip code 21218, across Wyman Park to the east of Hopkins University Homewood campus. Elm Street is in Hampden, in zip code 21210. Strange that he does not state the zip code on his analysis sheet--that is kinda basic information, especially for a buyer from out of state.
Because he is comparing two very different neighborhoods, what you have here is a misrepresentation of the value of the property of interest.
Hampden historically was a working-class neighborhood of small, often labyrinthine attached wood and brick houses. In the last couple of decades people have expanded and updated many of the homes and sort of schlepped the neighborhood into the middle class. But it retains its eclectic, piecemeal, down-at-the-heels charm, which is part of the fun. I'm fond of it. But Charles Village it's not.
Here is your 3631 Elm Ave: https://www.google.com/maps/place/3632+Elm+Ave,+Ba...
Charles Village is full of large sturdy 3-4 story brick townhouses, many of which have been converted to small multiunits that house Hopkins students. Along Charles Street overlooking the park and Baltimore Museum of Art the housing stock is lofty and patrician, not unlike uptown 5th Avenue across from Central Park in NYC.
https://www.google.com/maps/@39.326861,-76.617764,...
Here is 3202 Guilford Ave., one of the comparables in the analysis.
https://www.google.com/maps/place/3202+Guilford+Av...
You see the difference? The two neighborhoods are not alike at all. It's not unusual at all to pay in the $300s for Charles Village multis, but in Hampden? For that price you get a high-quality rehab (i.e. no oil-fired boiler), central air, lead-free certification, new roof, modern kitchens and baths and nice gardens and views. Also do you know anything about the other tenants--and whether you want to live downstairs from them? Read through the comments of @Seth Sherman and commit them to memory.
BTW, I don't think it's illegal for a listing agent to represent a buyer in Maryland, as long as all parties are informed and sign a dual agency agreement. But it's almost never a good idea, for all the reasons named above, particularly by @K. Marie Poe. And frankly, I believe it would not be in your best interest to work with the agent that produced this analysis.
Yay for you that you looked before leaping, and consulted with the BP community. I wish I had done that the first time I bought a rental.
Regards,
Nancy Roth
I meant @Julie Hassett (sorry for misspelling)!
Offer them $150,000 and let them come to you.
Flat out tell the guy his comps suck, like Nancy said.
Don't worry about insulting them or hurting their feelings, you're the one with the money.
I'm kinda curious, why Baltimore? Work? School? Family?
Thank you, Nancy! You bring up excellent points. I checked for Hampden comps myself and I couldn't find any triplexes that have sold in the past six months in the neighborhood. I don't really think there are many of them in that zip code from what I could tell from driving around the last time I was there.
If there are no comps in the same zip code, would there be a better way to estimate fair value than expanding into surrounding neighborhoods? I'm not sure... as Baltimore has such distinct neighborhoods that abut each other.
Your point is well taken about the different building styles.
And this next question is a newbie one... seeing as how the GRMs of all the comps listed are fairly consistent, is that an indicator that Elm is fairly priced compared to the Charles Village comps?
Thanks again. Your input is greatly appreciated!
Offer them $150,000 and let them come to you.
Flat out tell the guy his comps suck, like Nancy said.
Don't worry about insulting them or hurting their feelings, you're the one with the money.
I'm kinda curious, why Baltimore? Work? School? Family?
Hi Joe! Please see my previous post with my question about the comps.
Why Baltimore? Sunshine, palm trees, the year-round sunny weather, the gorgeous babes in bikinis... Oh wait... that's where I'm moving FROM!
Work. Even though I technically don't have to since I'm a contractor for a Baltimore-based company. But I'm excited about it. And I'm excited to be able to afford a little piece of earth (or two), which I haven't been able to do in LA. :)