Looking to purchase my first investment property in Baltimore

[William Wheeler]

I am a 31-year-old first time home buyer/investor looking to get involved in the Baltimore area real estate market. There are a million vacant properties and properties that are very cheap but I am not sure if this would be the right road to go down as there would be a good amount of renovations and repairs to the home. Another issue I have with this is would a renter want to live in an area where there are many other abandoned homes nearby. 

I do not have a ton of money to invest in or the best credit score but I am very motivated to become successful in this industry. I was always told that owning property is the key to becoming wealthy. What are my options to get my foot in the door to buy my first investment property? I would definitely consider living in the home and renting the other rooms out to keep my costs down and save money. 

Does anyone have any advice or know anyone in the Baltimore area that I could connect with to make this happen? I would really appreciate anything that you can do to help me out on my journey to owning my first property. 

Regards, 

William W. 

[Sam Lewis]

Hey William, welcome to the forum! Not many people recognize the power of real estate so kudos to you to getting involved in this community. 

Knowing your market

A couple things right off the bat - are you originally from the Baltimore area? If I were you, I would focus on an area or zip code you have lived in or have been familiar with for the past couple years. While I'm originally from Harford County, I decided to dive into Baltimore County after working in the area for a couple years. 

Vacant and cheap properties

There are many reasons as to why a vacant house selling for 10K may not attract dozens of investors to outbid each other for a property - location, location, location. This is where knowing your market comes in handy - why fix up a property if no one is renting on the block and most properties are covered in board ups?

Househacking

One way a lot of new investors get involved is by purchasing a home in good condition with a low down payment option. You can then rent out rooms, and if done properly, cover the mortgage and live for free. This typically requires credit in the high 600s, roughly 5% of the purchase property of the home to work with, and steady W2 income that can contribute towards a mortgage payment (many lenders require your estimated mortgage payment to be less than 45% of your post-tax income).

There are caveats around a lower credit score, such as going the FHA route - 580 is required. There are also caveats around W2 income - If you are a first time buyer, FHA loans could still be within in your grasp if you furnish additional documentation like 2 years of tax returns and 1099s.

Wholesaling

Wholesaling is the method of 'purchasing' a property by having both you (the buyer) and the seller sign an purchase agreement for a property. With the right clauses and contract, you can then assign (i.e. give) the contract to another purchaser for a higher contract amount. While there are ethical issues I have with wholesaling (especially when sellers are unaware of the value of their property), this is one way to make money with zero dollars of your own money in the process.

Disclaimer: I would not recommend jumping into something like this without shadowing a wholesaler, consulting a lawyer, or getting to know the home buying and legal process of transferring ownership with residential real estate.

Book list

A few books could really help you out, and ones I've read at least 2-3 times:

• The BRRRR Book by David Green
• The Book on Rental Property Investing by Brandon Turner
• Rich Dad Poor Dad by Robert Kiyosaki
• The Richest Man in Babylon by George Clason
• I Will Teach You To Be Rich by Ramit Sethi

Best of luck to you!

Sam