All Forum Posts by: Andrew Stephens

I've enjoyed reading this thread.  It is a good illustration of the relationship between risk and reward.  

The comment by @Joseph Pugliese reminded me of another NYC investor who has gotten his hands dirty in the Baltimore area: Jared Kushner.

The New York Times had a profile of Kushner's investments in Baltimore:

Jared Kushner's Other Real Estate Empire

 There are a lot of ways to house hack.  I live in a 1940s two story brick colonial in the MD suburbs of Washington DC.  The basement was unfinished when I purchased it, but it had a separate walk-out entrance and a half-bath.  I renovated half the basement into a studio apartment with a full bath and kitchenette and it's been rented for years.  I declare that income on my tax return and have a depreciation schedule on my taxes for that portion of the house.  My mortgage broker counts that rent as income and has me verify the tenant by providing contact information for the tenant in a letter.  Given the small size my annual expenses for this rental are minimal.

I've seen a number of townhouses for sale with unfinished basements, and finishing a basement can be pretty easy.  If you could house hack a townhouse basement by putting a tenant or roommate in the ground floor, that could work out well. 

Hi @Balaram Owens,  the meet up is at Norbeck Country Club on Tues. July 11.  It's on meetup.com and Justin Brady is the organizer.  Sorry I will miss it.

@Russell Brazil, you make some good points, particularly about the rent/price ratio as a measure of risk.  I think one thing that makes real estate so interesting is there is so much variation in valuations that one can be rewarded for the time invested in searching for a deal, and with more experience a person can discover micro-areas that have better value within a community.

For example, 2 years ago there were some good deals in College Park (in PG County) - within 1 mile of the metro, rents above $2,000 and prices below $275,000.  One reason those values can be found in Prince George's County is that the County is perceived as a higher risk area, but again, there is a lot of variation within the County.  I don't see those deals today, but I have seen some deals a few miles South and East of College Park. 

Hi everybody. I've just purchased my second SFR in Maryland. I purchased my first SFR for buy and hold in 2015.

I did a lot of looking in Germantown and Northern Montgomery County MD -- there are some nice townhouses, particularly near Lake Churchill. But I've come away thinking that there aren't a lot of good cash flow deals in Germantown, or anywhere in Montgomery County these days because it is a hot real estate market.

 My first buy and hold from 2015 is in College Park, MD and I paid $265,000 including closing costs in an auction on Hubzu.com.  I've got that house renting for $2,200 and the tenant is ready to sign his second 2-year lease.  I had bid unsuccessfully in 3 other auctions that year.

During my search in 2015 I looked at 45 houses / condos and kept a detailed spreadsheet of the asking price, the estimated rent, and the estimated simplified net (rent minus PITI plus HOA or condo fee).

I recently went back and sorted that spreadsheet by asking price, and then graphed the gross and simplified net rents, and it looks like this:

So you can see that the cheapest condo I looked at in a C neighborhood in PG County was priced at about $50,000, while the most expensive SFRs or town houses in decent school districts that I looked at in Germantown MD was priced just under $350,000.  The cheap condo flowed more cash.

What is really illuminating to me from this graph (and the experience of gathering the data in my property search) is that it proves the obvious point that in order to get cash flow, you have to purchase properties below a certain price.  Or in other words, the more you pay, the less you make.  The pros on biggerpockets know this already, but it has been enlightening for me to work through these numbers.

So, for example, I've found in the Montgomery County and Prince George's County MD suburbs of Washington DC, the houses below $250,000 will cash flow about $500 per month after PITI + HOA or condo fees, and the profit margins drop off significantly above $250,000.

That's because the rents I looked at are pretty flat -- everything I looked at rents between $1,500 and $2,200

Others may have different experiences in this metro area, but this is what I found in 2015, and again in 2017.

Specifically, I found that it is hard to get much cash flow out of the properties I looked at in the $250,000 to $325,000 range in Montgomery County. 

In 2017 I did find some investment opportunties in Northern PG County (like in Lanham), but the SFRs deals I looked at would sell in 2 or 3 days time, and I've been busy enough at my day job that I couldn't move on those houses quick enough. 

So for my second SFR I just purchased a decent 3 BR house in Cambridge, MD for $89,000, and I will make more profit on that house than I would have on any house I could purchase for less than $350,000 in Montgomery County. Obviously I will get less appreciation (and appreciation from a smaller base) but the cash flow in Cambridge will allow me to put it on a 15 year loan instead of a 30 and still gross $300 after PITI.

I'm still interested in Montgomery County, but the price / rent ratios just aren't working for me there this year.

And here is a screenshot of some of the houses in 2015 to give you a sense of the price/rent ratios and how quickly that ratio changes over $250,000.

I had hoped to share this data at the Gaithersburg meetup next week, but I've just been called out of town for work so I won't make that meeting.

What I learned from these 2 years of property searching is that you have to be in or near a community that has price to rent ratios that cash flow.  A metro area like Washington DC with a strong economy has fewer and fewer good deals, and when you do find a deal, you have to be ready to put in a competitive bid quickly. 

Again, a lot of this is common sense, but I found that I needed to dig into the data for my own education.

I agree with @Jeff Berg - the large windows on the ground floor look good.

I also think it can be cool to embrace a bit of the commercial / store front feel and not try to hide it too much.  I think a lot of tenants appreciate interesting design

If you don't have the budget to hire a designer, another option is to search on PInterest.com and images.google for related projects.  Here is a screenshot of when I searched for "storefont residential conversion" I think you may find some interesting stuff. 

I also think you could consider staying with the original exterior color, and perhaps painting the existing shutters, and adding shutters to the other windows where there is room (there are some good primers that will stick to the shutters).

Likewise, can you keep the original entrance awning (perhaps raise it a few inches it looks really low in the photo?) and cover it or paint it in a more contrasting color.

Regarding colors, some of the paint companies have online programs that allow you to upload your photos and test out different paint schemes. I used one by Sherwin Williams for my last project. 

Good luck with the project. Where is it located?

Interesting project.  It looks like you have a few design challenges.  I found this architectural design competition website a while back:


If you are remodeling or building a house, you can put up a few hundred dollars in prize money for an international design contest, and architects around the world submit design proposals. You pick the winners and the company pays for fist, second, third prizes. A lot of the architects who compete are from Eastern Europe and they submit computer designs for you to review.   You might get some really interesting ideas. 

I agree with Mr. Schnake, it's better to install higher quality fixtures.  Newer toilets flush better too, and that can save future service calls. 

IKEA cabinets are RTA   I used them 12 years ago in my primary residence and they still look great. I priced some again in 2015 for a rental and it was about $4,000 for a 10 foot galley so I just repainted the existing cabinets. IKEA can be cheaper but you have to avoid all the nicer features. 

A gas-fired boiler to heat hydronic baseboards connected by PEX tubing could be a cost effective option - running the hydronic loop should be a lot easier than adding furnace ducts.  I added a PEX circuit to my hydronic system when I switched from an oil-fired to a gas-fired boiler in my residence.

We now think of PEX tubing for drinking water supply, but it has been used for hydronic heating systems for a long time.

You could also add 2 heating circuits, one for the bedrooms and bath, and another for the rest of the house, so you could keep the bedrooms warmer at night.

Since you are getting your system professionally installed, you can ask for quotes on 1 or more options (hydronic vs. hot air ducts) and see what is cost effective.  The cost of duct work depends a lot on what the attic looks like, etc.