Hypothetical deal in Baltimore, MD with regards to expenses

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Hypothetical deal in Baltimore, MD with regards to expenses

Derick Wolf
Member since 2020 · 8 posts · 0 votes

This is essentially my first real post. I'm planning on investing around the Baltimore, MD region within an hour or 2 if needed, and I'd like to do some buy/hold/BRRRR deals. I know best practice is to look for 2% properties, and I'm familiar with that and the 50% rule- but just looking on the MLS to get some practice, I see a house for sale in Washington Village / Hollins Market area of Baltimore for 85K that is 2BR/2BR, 1050 sq feet townhome that looks like it doesn't need any work unless someone wants to upgrade the kitchen or bathroom. Zillow says this could rent for $1,350- but I have it conservatively at about a $1,200 rental. This is close to stadiums, etc on Lombard St. Here is even the actual listing (which anyone is free to go after b/c I'm just doing this for practice):

930 W Lombard St, Baltimore, MD

https://www.zillow.com/homedet...

I ran the following numbers- but I'd love for anyone to check my math to see if I'm crazy on thinking this is at least a little over the 1% rule, and why/"why not" this could be a decent perspective rental.  At first the zillow page had taxes at $79 per month- but Redfin has them at about $276- which is one of my biggest questions (how can I get an accurate tax rate- what should I calculate for tax rate in the city for a 1050sq ft property??

Price 85,000 (I'm assuming I could get it for 80K with 16K as down payment
Rent 1200 (14,400/yr)



Tax 276
Ins 30
Vacancy 120
Propt Man 120
Capex 120

Tot: 666 (7992/yr)

P/I: 352 (4224/yr)

$1018 ($12,216/yr)

Rent of 1,200 (14,400/yr)

Cash Flow: 2,184
Cash Invested: 16000 + 4000 closing costs = 20000

?What is Cash on Cash return?  .72??  

Any input on the math, or even this neighborhood in general is welcome and appreciated.  



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Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
6y

Dont forget to set aside the entirety of your cash flow to pay for the evictions, lol.

[email protected]301-893-4635Podcast Guest on Show #192
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  • Tim Youse
    Rental Property Investor · Baltimore, MD · Member since 2016 · 153 posts · 158 votes
    6y

    check SDAT for tax records, or you can check the cities tax bill page here: 

    http://cityservices.baltimorecity.gov/

    If you end up getting the property for less than its assessed for, you can appeal the assessment and pay the taxes based on your purchase price.

    Looking at your numbers:

    If your monthly NOI is $1018, and your rent is $1200, then your cash flow is rent minus your noi = $182/mo or $2,184 year. With $20k invested, your CoC return is about 9%. Not great. Ideally you'd want to chase deals that will get you better returns than the stock market average of 8%. Some local investors target 20% to 30% CoC returns here.

    Also, I checked a local section 8 rent calculator and their rent ranges are from $1110 to a max of $1264 for a 2 bedroom. Now if you can somehow get in a LEGAL 3rd bedroom? You could get $1637. I can't tell from the listing whether or not that loft area is the 2nd bedroom or not, of if that could be converted to a 3rd bedroom.



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  • Derick Wolf
    OP
    Member since 2020 · 8 posts · 0 votes
    6y

    @Tim Youse :  thx for the quick feedback, I was using the wrong number for coc  return, but even using your numbers, it looks like that should be .1092 or close to 11%, correct?  I’m assuming you should divide the $2184 (cash flow over 1 yr) / $20K for the 10.9%  While not stellar, that is OK, by some standards, no?  

    It looks like that 3rd floor is one bedroom, and possibly only 1 on the 2nd floor.  Is section 8 the only way to go down there?  Does it make any sense to add a nicer kitchen in these areas, or is that just throwing money away downtown?


    If there are any other Baltimore-specific expenses I should be calculating, plz let me know.   And if anyone wants to comment on some of the “better” neighborhoods vs others, that would be great.  I just chose this because it MIGHT be a slightly up and coming neighborhood by Baltimore standards.  

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    6y

    Dont forget to set aside the entirety of your cash flow to pay for the evictions, lol.

    [email protected]301-893-4635Podcast Guest on Show #192
    District Invest Group545 Reviews
    WebsiteView Page
    2Reply
  • Tim JacobPro Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
    6y

    The Hollins Market/Pigtown area really fluctuates where that property I think it will be a liitle to much of a risk though the house looks nice.  It also has a liquor store less than a  block away.  1200 sounds right but its the quality of tenant you will get.

    As you get really close to the stadiums there it gets better but then values are in the mid to high 100s.   Those can rent easily but will go for 1300 to 1400 thus missing the 1% rule though still a better deal considering the quality of tenant.   I would look at other parts of the city like Lochraven.  You could rent to college kids there renting by the room hit the 1% rule and the rent would be more guaranteed.  You can probably get in for less than 100k with an arv at 130k to 150k for a 3/2 rowhome with a full bath in the basement and basic cosmetic upgrades.  It would be less stressful once you start to lease it.  Charles Village/ Station North would be another area.  

    2Reply
  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    6y

     I personally would not walk to stadiums from that location.

    There is always a crowd walking around there who knows why :D)) and it is always a potential danger when house sits vacant.

    There will be evictions, you should consider that in your calculations.

    1Reply
  • Derick Wolf
    OP
    Member since 2020 · 8 posts · 0 votes
    6y

    Thx for all of the feedback.

    @Ozzy Sirimsi: Which areas would you recommend to start if someone is hoping to find a deal, but still be in a relatively safe/stable neighborhood around Baltimore (or the counties to the North, West, and South (I'm going to be a little closer to Howard County- so I'd like to keep my scope to things within an hour while I'm researching)- but hoping to find a fixer-upper for under 100K/ (200K if multi-family) to do a little BRRRR- Tim mentioned Lochraven area- I'm wondering if there are any other options that people would feel safe in, but still have a lower entry point.

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  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    6y

    I would also agree Loch Raven area is fine, Northwood, Hamilton, some part of Woodbourne, Ramblewood, Woodring, Beverly Hills and up..., my suggestion would be to work with an agent who knows it.

    Also main thing is you will be looking at a pretty heavy renovation if you are buying under 85K around those neighborhoods. May not be full gut reno but pretty much renovating everything else.

    2Reply
  • Victor Velez
    Rental Property Investor · Member since 2020 · 3 posts · 0 votes
    6y

    @Tim Youse

    Hey Tim where did you get access to the section 8 calculator?

    Thanks!

    0Reply
  • Tim Youse
    Rental Property Investor · Baltimore, MD · Member since 2016 · 153 posts · 158 votes
    6y
    Originally posted by @Victor Velez:

    @Tim Youse

    Hey Tim where did you get access to the section 8 calculator?

    Thanks!

    This is for Baltimore Regional Housing Partnership, one of the many voucher programs in the city. Enter the address and it will give you the range that they are able to pay for a given area. 

    http://brhp.org/voucher_holders/search/new

    2Reply
  • Victor Velez
    Rental Property Investor · Member since 2020 · 3 posts · 0 votes
    6y

    @Tim Youse

    Perfect thank you!

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