All Forum Posts by: Alan C.

I don't know the Texas market, but everything comes down to your specific situation and your tolerance for risk/reward.

If you want cash flow, then Baltimore is a great place, but you have to factor in the necessity of knowing the tenant-friendly laws and regulations. These can be dealt with and if you have a good team and/or systems in place, you can make very good money. However, you probably won't see any appreciation unless you get lucky and buy in areas that really take off. But in that case your taxes will skyrocket and you won't be able to appeal them, so your cash flow gets reduced.

Also, Maryland has high income taxes so you need a good accountant to help you structure your business to minimize your net income (see Trump, Donald for an example of this).

Again, your decision will have to be based on your long-term goals and unique financial situation.

Good luck with whatever city you choose.

I can't give you an exact cost to rehab a building like the one you described.

My bigger concern is whether the cost, whatever it is, would be worth the effort. 

In many parts of Baltimore, you can buy a row house for $5K-10K (or less) that are in much better shape than the one you are looking at, but no one will touch them. The reason is that no matter how much or how little you spend, the property will never be worth what you put into due to the surrounding houses. That is one reason that whole blocks are abandoned and vacant. There's a tipping point where the houses are simply not worth the maintaining since people won't live in that area. And that is why some areas look like war zones and are being torn down.

If you happen to be in an area where people might want to buy or rent, then you have to really look at the numbers. For a 12-foot wide house, you are probably looking at less than 1000 square feet above grade and it will be tough to get 3 decent-sized bedrooms in that space. If the house was in a hot area, 2 beds, might be OK for a homeowner, but the fact that the house is in such bad shape tells me you're not in that kind of neighborhood.

So, you're exit strategy is probably fixing this to rent, which means it won't be  using extreme high end finishes and that will save you some money for materials. But the bulk of renovation costs are in the labor and the more work needed, the higher the cost. And you would be spending more in demo and more to essentially build a new house versus updating an older house.

All that being said, I am confused about your idea that the foundation is rotted and may need to be demolished. Most foundations in Baltimore are cement or at least stone and they are below grade, so I don't understand why you would need to replace a foundation. I have seen foundations that have shifted or otherwise had structural issues, but never one that was rotted.

To gut a small house back to four walls and rebuild it, might cost you upwards of $90K-100K. In my estimation, your cost to buy and fix such a property is probably not a profitable project. 

Feel free to contact me directly and I'll be happy to give you better ideas once you tell me the address or at least the block where the house is located.

You're looking at some very hot (and high-priced) areas. That means that you will probably have a tough time getting the numbers to work. You may need to look in other areas where the prices are more reasonable. I'm assuming that you don't have a lot of liquid assets. If you have excellent credit, you may be able to get a deal, but there also my be some creative ways to get your first property.

I am president of a Baltimore area REIA, so take that in to consideration when I tell you that you should join one or more groups and make connections that can help you get a better idea of what is happening in the market from people who have been investing for many years. Also, you'll find out that there are numerous ways to put together deals even if you don't have a lot of money.

The key to being and staying successful in this business (as in most businesses today), is to get educated and keep your knowledge up to date as the market changes.

It sounds like you need to get some more in-depth education, but I'll give some free information to get started: 

You need to market to find motivated sellers.

Good luck.

One other option is to pay cash for your next unit(s). If you have $150-180K, you could probably find a couple of one-family houses or maybe two 2-3 family properties in Baltimore City. I doubt that either of those will net you $1200 per month, but you could consider buying more boarding houses with that cash if you want that kind of cash flow out of one property. 

It really depends on your risk-taking tolerance. Some people like to know that they have paid-off property, others shoot for higher returns by using leverage.

No matter which way you go, it sounds like you're on your way to being successful.

Congratulations!
Hope that this will be the first of many more.

You may not get much even if you can find the owner. 

If that fails, contact Baltimore Housing and file a complaint. That will trigger code violations and fines if the problem is not corrected. If the property is vacant long enough, it could cause the owner more problems. 

By the way, what is the zip code where your property is located?

Is the house next door vacant or occupied?

If occupied, talk to the owner and see if you can take a look at their basement. You might be able to find the cause of the leak.

If vacant, try contacting the owner.

It's best if you can find the source of the leak to stop it, but if you can't, try using hydraulic cement and/or DryLok™ on the leaking wall.  

If this is your first or only rental, I would suggest you manage this yourself; at least for several months. That way, you will find out what to look for in the way of services provided by a management company.

When you do look to hire a management company, I would speak to tenants in properties they manage. And I would not necessarily get to the tenants via the company. They will only give you the ones who will give rave reviews. I would see if there was some way to find out which properties were managed by the company and go to the tenants directly.

Owners might tell you one thing, but the tenants (your customers and clients) are the most important part of your rental business. If they feel neglected or mistreated, your business will not do well.

Here is the link for calculating security deposits

https://dhcd.maryland.gov/Page...

Note: The interest rate is "greater of the daily U.S. Treasury yield curve rate (“Constant Maturity Treasury”) for one year, as of the first business day of each year, or 1.5%." RIght now, that means 1.5%

The calculator on the website link above will figure out what you owe based on the lease start and end dates.

By the way, if you have a 1-year lease and the tenant is moving out in 6 months, you may have a case for not returning the security deposit due to a breach of lease. But you should check with an attorney to see if this is true.