Baltimore Deal Analysis

[Account Closed]

Hey BP,

In my electronic housing search, I've found a property that seems like the type of deal I'd like to invest in.  Please take a look and let me know if I've missed anything.

This property is in the Woodbourne-McCabe neighborhood of Baltimore.  The Trulia crime map shows that it's adjacent to a bad block but is itself on an okay block.  

List: $69k. Hopefully I'd get a deal, but assuming I don't.

Estimated rent: $1100 based on craigslist comps; zestimate is $1250.  Is this a reasonable market rate or is this a Section 8 rate?

50% expenses (including property management): $550.  This is a bit of a worst case scenario.  My detailed list comes to $350.  Also, the property seems recently renovated so cap-ex should be low for the first few years.

Mortgage with 25% down and 5% interest: $275.

Cash-flow: $275

rent-to-price: 1.6%

I think this meets all of my criteria.

Price: $50k - $125k

Rent-to-Price > 1.25%

Trulia crime rating; Lowest/Low

Rent > $1000

Cash Flow > $250/mo

CoCR > 10% (with 25% down)

Square Footage > 1100 sq ft.

Recently renovated, rent ready

Thank you so much for any input and advice you have.  I'm really learning a lot from BP and I hope to get started very soon.

[Ned Carey]

@Account Closed I know the area fairly well. It is not a bad block but surrounded by not so good blocks. My partner has a rental near there. It is a rental because he couldn't sell it as a flip. He found it tough to rent. The rent just covers his basic expenses and does not cover vacancy and turnover or  management costs. (he has a hard money loan)

The numbers you have above are optimistic. Insurance will be more like $500 to $750 a year. Your property management cost does not include tenant placement. Expect to pay 1 months rent for tenant placement. Your vacancy does not cover the cost of turnover. 

Turnover cost can vary tremendously. A tenant lives there 5 years and leaves the place in good condition, $500 in turnover repairs or $100 a year. Tenant lives there 1 year and property needs $5000 in repairs. That works out to $5000 a year. Now the latter case isn't likely to happen every year but it punches a big hole in your numbers when it does. Those repairs don't consider the cost of an eviction if that is necessary.

This is not a horrible deal but it certainly isn't exciting either.