All Forum Posts by: Matt Schelberg

@Shiv Gettu Yes most people just generalize when they are screening deals.  The houses you are looking at probably fit into a handful of categories. Figure out the capex for each category (e.g. rowhouse; 1,500sqft single-family detached; and duplex).  Then just plug those numbers into the calculator.  That is a good screening tool to use.  Then you can do more thorough analysis when you go to make an offer.

Also keep in mind that it is much better to have a $5,000 capex item due in 20 years than a $5,000 capex item due next year.  Because if you spend $5k next year you will not be able to reinvest that money and grow it.  

Hi @Shiv Gettu I agree that it is often very subjective to estimate capex and maintenance.  

Determining capex requires identifying how much a replacement costs and how long it will last. For example a water heater can be estimated to cost $800 and last 8 years.  So the annual capex cost for just the water heater might be $100/year.  You repeat this exercise for all the major systems in the house.  A good article on the subject by Brandon Turner is here.

Maintenance:  This is probably the toughest one to estimate because it has the most variables.  Age, local costs, and the quality of your contractor network (are you using an expensive national plumbing chain or a licensed plumber who works out of his house and has little overhead?).  Ask a local property manager what a realistic average annual maintenance cost is for your type of house.

Vacancy rates:  Ask a local property manager what vacancy rate to expect.  One variable to consider is the rent relative to market rates.  A below-market rent will have lower vacancy.

I am pointing out some flawed math in your analysis of profitability.  Two years of operating performance does not provide a realistic picture of income.  How will you account for the next roof replacement; water heater; tenant turnover; and vacancy?  

Basic 101 stuff.   Why use metrics that are misleading?  I'll jump off now -- nothing more to add on the topic.  

@Account Closed When you describe it as a rental in Baltimore I think many Marylanders will assume you mean Baltimore City.  That's how I read it.  But if it is Towson (Baltimore County) that's different -- lower taxes, higher rents, better schools, better tenants.

You say it is rented for "net $1,500/month" but what does that mean?  The fact that it is free and clear doesn't make it a better investment than if it had a mortgage.  You can juice up any deal with a high down payment and it will produce cash.  

I recommend posting some actual numbers:  actual rent; taxes; and your estimate of maintenance; capex; vacancy; etc.  

That will allow you to look at your return on equity...which in this case is really the same as your cash-on-cash return because there is no leverage.  I'd guess you are making around 5% on your money after budgeting for all expenses.

That's not bad, especially in an appreciating market like Towson.  And I think the decision to refi and load up on debt to finance more rental mortgages is a personal decision.  It will definitely boost your returns and in 30 years you will own a bunch of properties free and clear.  But there is more work and more risk.

@Natalie Nelson According to the Baltimore City Zoning Code, those 4 unrelated persons would need to be under a single lease.  If they are not under a single lease it is considered a "rooming house"...which is probably not permitted but check your zoning here.

The Zoning Code says a rooming house "contains 3 or more rooming units occupied...as a primary residence by individuals who, even though they do share common areas and facilities, do not form a single housekeeping unit and do not provide compensation under a single lease for occupancy of the facility"

Look at pages 47 and 80 of the PDF.

@Jeremy Anan If the judge directs me to rent court I don't know whether I'll laugh or cry.  Because the rent court is the one sending us landlords to small claims court!  Very "Catch-22" of Baltimore City...you've got to hand it to them...they know how to troll landlords.

@Ned Carey That gave me a chuckle.  Yes it will likely be a moral victory.  But the tenant is Section 8 so I understand a judgment will prevent her from moving...or possibly endanger her voucher if she doesn't pay.  We'll see what happens!

And Ned this is a property you sold me...talk about a lemon!  (Just kidding it's one of my best performers).

This is at best a break-even rental property.  Go to the BiggerPockets rental property calculator.

@David Norfolk If you received a violation notice you should go ahead and fix all items identified by the City housing inspector and then contact them for re-inspection.  If Housing is unresponsive, send written request for re-inspection to document your efforts.  Your liability for things like the deck railing are higher since they have been identified by a third-party and you've been notified that they exist.

But your question brings up a great point about the City rental inspections:

As a rental inspector my interpretation of the rules would be that this house should only pass the rental inspection after the violation notice has been lifted.

@David Norfolk None of the items you mentioned would cause a fail ***unless the brick wall is structurally unsound or if the rooftop deck planks are unsafe.

What do you mean that your tenant called the city for an inspection?  Who did they call? What type of inspection did they request?  The rental inspections are conducted by private home inspectors registered with the City...not by city inspectors.

I'm preparing to take a tenant to small claims court for unpaid water bills in Baltimore City. Are there any Baltimore City BPers experienced with this? Any pointers would be greatly appreciated.

It's a small amount of money, so I'll be filing myself. No attorney. 

What are your lessons learned? What documentation should I gather in addition to water bills and a rent ledger?

Thanks!