Possible buy and hold deal in Baltimore?

Question

Hello everyone. I got a deal that came back from direct mail that i am considering **may** be a good first rental property.

Split-level apartment condo, 2 bed, 1 bath on each floor, each unit generates roughly $800 rent. Minimal repairs, as it has been rehabbed. B- neighborhood.

Owner's son called whose parent owned the property, but is now ill and incapacitated. He lives on west coast and initially wanted to sell quick, but there is a 86k mortgage left on it, comps in neighborhood are at around 130k.

I believe given the circumstances, he would agree to possibly 95-100k to pay off debt and be done, as he has said he has no interest in managing or maintaining the place.

My initial challenges and strategies i have been debating..

1) To get traditional financing OR asking owner's son to seller-finance, as if i put a deposit down, and he gets to have a check every month and walk away, and I oversee the tenants.

2)Owner's son has to get guardianship/POA over the property which is couple grand to complete with an attorney, and takes a few months

3)There is a separate duplex next door that is vacant, that i have contacted that owner about that I may be able to contract as well, that could be a nice compliment to this unit.

4)Try to negotiate the mortgage/debt down with the bank since the owner(his mom) obviously cannot pay the note any longer, or can negotiate on her own behalf.

Any ideas on if this is too big of an undertaking? Thanks for any advice, different strategy or tips.

Michael Krupp · Answer

Hi Morris,

So it is a 2 unit, with $800 rent per unit and you believe the value is around $130k.  You believe he would agree to getting the debt paid off and moving on correct? I have a bunch of questions: Is the debt current? Have you seen the house, pictures, video, or had an inspection company take look at repairs needed?  Do you have a copy of the leases? Is it market rent or below market?  What is the status with lead certification? Are you aware the lead concerns with rentals in the Baltimore area?  Have you verified who is on title and if the POA process has started or you will have to get that moving with the son?  Having a vacant unit next door may not be a good sign of the location, especially if there are more vacants or board ups on the block.  Do you currently own and manage out of town real estate and have a system to do so? Do you have a team in the Baltimore area, realtor, contractor, property manager, etc?  I just think before proceeding, these things should all be considered, before even considering if it is a good deal.  I always find that there is more work needed than most think.

Ned Carey · Answer

@Morris Lucas express mail can be used to get the owner to sign. However if that doesn't work you can get the son to sign a contract. While that contract is not legally enforceable it will make the son feel obligated. You an work out the details later.

Ned Carey · Answer

@Morris Lucas you say it is a condo but then describe a 2 unit property. What is this?

Have you taking into account condo fees?  They can kill a deal. Are the condo fees behind. How many rentals does the condo association allow? How close are they to the limit?

Baltimore does not have a strong condo market.

Getting banks to do a short sale these days is quite tough and time consuming.

Owner financing vs traditional financing depends on what you can get. figure out what you can get, then choose the best option to you.

Ozzy Sirimsi · Answer

why is POA taking couple of months??

Title company can prepare one,  they can go to bank, get it notarize and done.

I did it many times, is there special condition ???

Ned Carey · Answer

Too bad I can't vote twice for @Michael Krupp's post

Morris Lucas · Answer

@Sebastian E. Good point about the non-conforming designation, I am checking city ordinances today.

@Michael Krupp Whew! You definitely hit on some valuable points. I know the houses in Baltimore tend to be fairly older builds, so the lead may be a concern.

The POA may be the most lenghty process, but as you brought up, if the other concerns (rent, repairs, more vacants) that may be a mute point. I will definitely do some more digging. Thanks you all for the input!

Sebastian E. · Answer

Hello @Morris Lucas It also depends on if the property is a non conforming or conforming duplex and precisely which area it is in.

Morris Lucas · Answer

Thanks @Ned Carey

Don't think i'll be able to ask the owner, as according to son, she will not be able to sign any documents going forward.

Guardianship or POA from the son looks like it is the only option, which takes a few months.

In the meantime, getting him to agree to contract will at least get me closer to the deal(hopefully) until he can make decisions with the bank/property on her behalf.

Ned Carey · Answer

Well that depends on what price you are talking about. Some of the best deals take the most effort. Deals that take a lot of effort usually have no competition because no one wants to work that hard.

Morris Lucas · Answer

@Solomon Morris

Yes, see #2 on first post, that is what im debating, if it is worth working through that process for him to get guardianship over her affairs and control of property.

Possible buy and hold deal in Baltimore?

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