All Forum Posts by: Jim R.

Maybe its captured above but over past year, maybe 2, a fairly large mortgage fraud went down in Baltimore and maybe northern NJ. I don't really know all the facts but appartently some hundreds of houses had appraisals faked and largely exaggerated and passed on to banks and mortgage lenders who ended up holding worthless or underwater loans. I do know that in searching for mortgage loans this past year many major DSCR lenders said we don't lend in Baltimore anymore or they raised their minimum loan amount over $200,000 meaning the purchase price would be about $250,000 or higher.

Your stock return numbers are way wrong. The S&P 500 has average annual return is 12.6 % over the past 10 years, inflation adjusted is 9.2%. Over the past 20 and 30 years the average annual return is approximately 10%. No toilets, no termites, no bad tenants.

Steve, can you expound on the Baltimore fraud scheme?

Several times a week I get ad based emails from Easy Street Capital thru biggerpockets emails. How can I unsub or block these annoying emails?

Robuilt (youtube channel) has been working on a tiny house village for a couple of years in the Smokies. That's after he acquired a 40 acre site for it. He has some videos about it but not in great great detail.

@Devin Monroe

I support your conservative method of running the numbers. Don't be misled by the You-tube gurus who rarely show you a realistic proforma when they run their numbers. Your method will more accurately reflect what will really happen. I looked at Baltimore very closely for rentals, some issues:

1. The typical Baltimore rental is a 100 year old rowhome. Even if rehabbed there will be age related issues not addressed by the rehab. Some of these include the sewer connection to the city and iron pipe issues in the unit. Rehabs should address new roofing, plumbing, electrical, flooring, appliances, and new HVAC in addition to all the cosmetic issues. This will run from $75K to $100K and all of these will not have been performed in your base $145K unit.

2. Many Baltimore rehabs will rubber coat the roof, typical this has about 5 to 7 year life.

3. Lead paint is always an issue. You will need to remove it completely by a certified contractor or have a periodic inspection. Either of these cost money.

4. Baltimore is tenant friendly. You will also need what is essentially a landlords license.

5. Baltimore very much street to street in terms of value and street crime. You absolutely need to know the areas or work with an agent you know and trust.

6. Real Estate taxes will greatly increase due to the price you paid vs the original appraisal. I understand that Baltimore has not been very aggressive in increasing property taxes due to resell. I expect this to be stepped up since states and cities will need to increase taxation due to covid expenses.

6. You need to ask yourself why an owner or investor is currently selling his 100 year old house if it is a gold mine. Likely there is significant deferred maintenance or cap ex that needs to be corrected.

7. Closing costs are high in Baltimore roughly 5 to 6%.

I am not trying to advise you not to buy in Baltimore but rather supporting your conservative calculation of costs and returns. I believe it is realistic to expect a $100 to $200 cash on cash return or 6% Cash on Cash return if using a PM company. Make sure you get a home inspection and property appraisal before you buy. Best of luck!

Thanks for sharing. Do you have a breakdown of the $11,000 closing costs on a $136,000 property. That seems awful high and I wonder what is driving the closing costs so high? Thanks again.

Thanks for laying out this story in detail. I'll take one of these if you have another just laying around..:-)

Anybody got a good book reference?

Adding to the mix, interest rates have bumped up quite a bit. A month ago I was looking at < 3.5% but that is nearing 5% now if you can get a lender to even respond.