All Forum Posts by: Eric Masi

@Tom Gimer I've read conflicting accounts of who owns the land in the case of ground rent. 

LiveBaltimore seems to indicate that the ground rent holder owns the land:

https://livebaltimore.com/city-living-essentials/g...

However this law firm in Maryland has written a conflicting article:

https://pricekeir.com/what-the-heck-is-ground-rent...

The people's law library which @Matthew Paul linked to says: "ground leaseholder who holds a reversionary interest in the property or 'ground' underneath a home." The key there being "reversionary interest," which would indicate that the home buyer owns the land conditionally.

Now I'm not a lawyer. And admittedly I'm just arguing semantics but at the end of the day you either pay the annual ground rent or you redeem and that's 80% of what anyone needs to know about ground rent in my opinion. Additionally I think this whole conversation just highlights how absurd ground rent is in the 21st century. But I'm biased against it so there's that. 

Happy investing everyone!

@Michael Randle Essentially ground rent is an antiquated system whereby one person (or entity) owns the right to collect ground rent fees. They don't actually own the land or the improvements on the land, rather they just own the legal right to collect a fee from whoever owns the title deed. It is worth noting that the owner of the ground rent can foreclose on a home to collect unpaid ground rent (though I've heard that sale proceeds pay down the arrears and the rest goes to the homeowner). And as the OP suggested the owner of the deed can "redeem" the ground rent so that for one lump sum they (and any subsequent owner) never have to pay ground rent again.

I personally hate ground rent. But from what I've heard it seems that ground rent is largely limited to Maryland at this point and in particular Baltimore City (yay, another hoop for us to jump through).

@James A. the GCs I've spoken to have been experienced guys who deal with both investors and homeowners generally. One of them freely admitted that he could get it done for just over half the cost of what he'd charge me HAH! That kind of honesty is commendable (even if annoying). 

But when I say full gut and rehab I'm talking: taring everything down to the studs, updating plumbing and electrical throughout, probably upgrading the panel, adding duct work for heating and cooling, new mechanicals (boiler, A/C, etc) , hardwood floors, new kitchen, new dry wall and insulation, paint, finish work, etc. So if you need less than that done then you'll spend less per square foot obviously.

Now again I think this is highly dependent on what you know and who you have relationships with. So it almost certainly can be done for less that what I stated originally. In fact I really want someone to tell me I'm completely full of crap! That way I can reduce my estimates, increase my MAO and stand a better chance of buying something in this hot market.

So before I offer my suggestion I should note that I don't have any first hand experience with this situation nor am I a lawyer or CPA. However, it sounds like you may want to consider seller financing in this situation. That way all the terms can be set up however you like: down payment, monthly payments, balloon payment after X years. You'll get the deed and assume all liability, your father gets a smaller taxable amount up front and payments over time. Something to consider, hope that helps!

Several contractors I've talked to have told me to estimate $75 - $85 per sq ft for a complete gut and rehab. That covers pretty much everything from the studs up including the markup on labor / materials. Moral of the story is that you pay out the nose to pass the work off to someone else who has all the connections and know-how. I'm sure some people have good working relationships with contracts and know guys that'll do it for a fraction of that and if you do the legwork / grunt work yourself you'll save money yadda, yadda, yadda. But if you're new and think your deal will need that kind of work done I don't think it hurts to use those more conservative numbers.

I have never utilized his services personally but if I needed roofing done I'd certainly contact Dave Wandel with Charis Contractors. Dave is an amazing person, with the added benefit that he is also a real estate investor. Hope that helps!

Welcome, sounds like you're off to a good start!

When you say "occupied" do you mean that they have tenants with leases or some kind of squatters?

I mean if the property has tenants with a lease, that's a binding contract that you assume when you buy the property (as far as I'm aware). But if the property was managed half decently you may consider riding out the period of the lease and just giving notice that you won't renew when it's up. Or you could ask the tenants to sign a new lease with your terms once the old lease is up.

If you've got something that is less than on the up-and-up you'll probably have to evict or try cash for keys or something.

I just went down the the Office of the Zoning Administrator in Baltimore City today and I was told that units can't be added to a building in zoning codes R1 - R6 (e.g. you can't turn a 3 unit into a 4 unit). 

I know that R1 and R3 are SFR only so it makes sense that they don't allow for small multi-family (e.g. a 1 unit turned into a 2 unit). But R2, 4, 5, 6 already allow for small multi-family to be built so it seems a little ridiculous that you can't, for example, convert a basement into a separate unit if you follow all the other building regulations.

Does anyone have experience adding a unit to a small mutli-family? Or experience getting something rezoned or some kind of exclusion or exception to the zoning? What about turning a particularly large garage into a unit like some people do with their "carriage house"?

I'm trying to figure out if it is at all possible to add value in this way. Any help would be appreciated, thanks!

I completely understand @Ned Carey I always include property management fees as part of my expenses (10% of the gross monthly rent) and I do not consider that money as part of my IRR.