Baltimore - a path to never-ending pain

[Wendy Stclair]

Anyone considering investing in this town i just wanted to give my 1 year of experience and advice. Bottom line, don't do what i did. 

1) Don't buy through a turnkey provider -they promise they are doing amazing renovations of quickly gentrifying neighborhoods.  FALSE - No neighborhoods are quickly gentrifying in Baltimore. Everything works slow and the city govt is completely inept at a minimum and possibly worse. Further it could take MONTHS after closing for your new home to be rent ready as the city seems to slow roll any new permits for anything. I was 6 months before one home was even ready to rent.  

2) Don't believe it when anyone tells you "Zillow is wrong and those photos are old" - no they are NOT. A burned out street on Zillow is still a burned out street today. 

3) Dont believe it when they say your property taxes will be low for 3 years - its a luck of the draw when the city wants to reassess your home and it could be THIS YEAR and cause that $400 to skyrocket to $2,000 or maybe - if you are super unlucky like me - $5000  

4) Related to #3 - BUY PRE-RENOVATION not after, so the sales price does not trigger a re-assessment and cause a 522% increase overnight in property taxes from $800 to $5000 within the first year.

5) watch out for SUPER HIGH UTILITIES AND other city FEES! Water is $150 / month! Annual rental licenses are $200, the city requires annual inspections etc. The list goes on and Baltimore knows how to stick it to you. 

6) Section 8 tenants are not all roses - in one house this year i had a break-in that turned out to be the crackhead boyfriend breaking down the front door and punching holes in walls. In another home my tenant refuses to pay the $200 / mo water bill,  thereby cancelling out my tiny cash flow profits and i have to pay it. I'm told she cannot walk away without paying it eventually (or risk losing her "voucher" .. but i'll have to take her to civil court for it.   

7) FEAR THE EVICTION PROCESS - in my only non-section 8 house i have a professional scammer living. I blame my PM for putting him there but upon arrival he somehow conned the PM for a free month, then proceeded to NEVER PAY A PENNY IN RENT. To get someone out of your house requires you take them to court 5 TIMES before you have the right to NOT ACCEPT their measely 1 month's rent from 4 months ago, despite the fact they already owe you 3 more months.  It is now September, I have been fighting since Jan to get this loser out unsuccessfully.  He owes $6,000 at this point plus the water bill.  I will never see it. 

8) ALL YOUR CASH FLOW WILL BE EATEN UP - whether its the City taking it from you, your PM, or your renters and the courts, all you will get is pain. 

bottom line - run from inner city area Baltimore.  I just wish i could have told my future self this 1 year ago. Cheers

[Michael Smythe]

@Wendy Stclair unfortunately, have heard similar stories to yours, in many cities. 

Wish investors would spend more time educating themselves and asking more questions!

See below for our advice (copy & paste) and let us know how we can improve it:)

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods:

https://www.biggerpockets.com/...

(BP search feature can be problematic, so we’ve also added links @ our website under View Cities & Neighborhoods We Service)

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't invest the time to ACTUALLY understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Let us know if we can help in any other way.😊