All Forum Posts by: Michael Krupp

Good job John! Hey Joe Norman! I have a bunch of rentals myself and find that you need a good team as mentioned before.  Make sure you have a good realtor or more to help you find the deals, as well as wholesalers.  You need multiple lending sources and banks for refi's.  Good contractors to get the work done properly.  Find a good tenant placement person, and/or property manager when the time is right. It takes time to build, Rome was not built in a day, so just keep on keeping on.  As long as the numbers work...don't overpay like many investors today.  The other key part of the puzzle is the right systems in place to help you more easily manage the entire process.  Are you only interested in S. Baltimore? Reach out to me if you need some referral sources for any of the above.

Hey Folks, here are some humble comments from a flipper in the Baltimore area that has been in the business for almost 20 years. I am actually a flipper, landlord, hard money lender, and real estate investor coach. I know there are lots of ideas and options out there. I think if you look at the statistics, you will find that most often, staged houses sell faster and for more money at most price points. Yes, in a hot market, where the inventory is low, you can get away without it. If you are in a competitive market, everything you do helps. I always stage, at all price points, it is a cost of doing business to me. I have learned the hard way, that while I cannot guarantee success such as a quick sale at the highest price, I can minimize mine and others risks, by removing as many roadblocks to a sale as possible. Most buyers simply have no vision, and that is why you stage or virtual stage. I am doing my first virtual staging right now on a new construction project that I built, it went live today. I have done drone video, and looked into matterport photography which I am told is cool, though not that effective. You can also stage the house yourself, take photos, etc. I have found that leverage is key, not just with money, even more so with time. Once time is gone, you never get it back. I hire a stager, a realtor, landscaper, etc. I find my time is best spent finding and managing deals, not doing the work myself. This is only me. For someone new and getting started, there are always bootstrapping options, though don't forget about your time. ROT is just as important as ROI.

Please join us for our monthly Investor Meetup!  We will be discussing contractors, rehab estimates, draw schedules, and scopes of work.  See the link below to sign up!

https://www.meetup.com/grid-baltimore/events/ctznzqyzhbcc/

Great topic folks, I will chime in with some thoughts from the Baltimore, MD area. I have been thinking about all this for the last 2 years, kind of waiting to see if a shoe will drop.  Regardless, it is not as bad in my opinion as it was in 2008 with all the banking and corporate collapses and more.  Yes, real estate prices have been high, the stock market is overvalued, and interest rates are on the rise.  Who knows what economic or political issues will arise.  These must all be taken into consideration for a conservative or possibly different approach in your investing.  There are always opportunities, they just seem to change I believe.  One strategy may just be to take some money off the table.

I have been rehabbing and hard money lending the past 9-10 years on my own pretty strongly. The best opportunities were surely after the crash in 2008-09 for a few years. There has still be opportunities since then. I have seen the past 1-2 years, a lot of inexperienced investors entering the market, and overpaying for properties. Whether it be on MLS, auction, or wholesale, I won't pay what they will, so it has been harder to find properties, but they are still out there. You just have to look harder and differently. It is also about relationships.

The market today has obviously changed.  Buy prices higher, sales prices high, though starting to see some come down.  Days on market is definitely going up, though it depends on the area.  In parts of Baltimore City, the higher end and more competitive areas, like Canton, Fells, Point, Federal HIll, Locust Point, are getting hit pretty hard it looks like.  In the county, depending on where you are, housing are still selling fairly quickly provided you have a good product at a fair price.

The first time home buyers market $250k or less, used to be a great market, and this might be changing.  I am going a little higher end in good county areas with good schools.  I have also started doing new construction under $500k and those are typically under contract before they are completed.  I think if you are savvy, patient, conservative, there is still opportunity in my opinion.

I also own rentals and will be looking for more of them and have not had much trouble getting things rented in better areas, in the $100-150k range for rowhomes, and no board ups.  I do not do lower end housing.   

On the lending side, the first 6 month had been very very busy. The past 2 months, much slower.  There are more novice investors in the local market now though, the past few years, some have been put out of the market due to mistakes on lending, and just not having the experience.  There has also been some larger regional or national companies that have entered the local market offering enticing rates.  Most of them cannot offer the local knowledge and insight, and cannot move as quickly as us local hard money lenders.  Even though we might be more expense, we surely can better help our local clientele and can respond much faster to their needs.  I will starting a topic shortly on a recent loan experience and how hard money lenders can be a new investors best friend.

Open to thoughts.

Regards,

Michael Krupp

Hi Manuel,

I am a hard money lender and investor in the Maryland market for 20 years, and just making my way back to Bigger Pockets. It has really grown and is a fantastic tool to connect with real estate investors nationwide and in your local market. As you were advised above, we do not typically lend to even A Credit borrowers 100% financing. Typically, you will see loan options around 65-75% LTV and borrowers will need to bring 10% of the purchase price plus closing costs to settlement, or some variation of that sort. We want all borrowers to have "skin in the game".

You could look for a friend or family member to put up some cash and make them a partner or offer them a fixed % return on their money for set period of time.  There are sometimes creative ways where you can get a seller to hold a small second mortgage too.  Seller financing sounds great, though it is a needed in a haystack to find.  Every deal is different and there are lots of opportunities if you find a great property.

With that said, I have done 100% loans to repeat borrowers that find a great deal such as where my loan would cover 100% of his purchase and renovation, and still only be around 50% LTV! That though, was years ago. Realistically, that is an unlikely event today, given the market. You probably are best to find someone you know who trusts you to help you get started.

Best Wishes,

Michael Krupp

MD Private Lender

To qualify, I am not an attorney nor an accountant and you should consult both for the tax and legal implications. I am only an experienced investor and lender. You received excellent advice already above. It is buyer beware in my opinion as when you buy someone else's LLC, you buy any prior issues that they had. You should be able to search for liens and litigation as suggested, but it will likely not be 100%. The seller can indemnify you against any outstanding issues, but then you could be stuck in a legal battle should something occur.

On the other hand, the financial savings can be great though. I prefer to be 100% safe and clear and would rather incur the cost to know what i have. I would probably buy it in my own LLC.

I never buy a property that someone else rehabbed and put a tenant in, but that is just my personal rule.  I prefer to know the condition of the property and the work that was done, and ensure permits were pulled as well as getting my own tenants. That way, you also will likely get much more equity since you are buying a distressed property and creating value by renovating and renting it.  

If you can do some background research and ensure you have a solid seller, solid property, with likely no prior issues, and with all permits pulled if recently renovated, all lead certs, prop registration, and MDE registration done, etc., and you have complete details on tenants, payment history, etc., then it might make sense to proceed with the LLC purchase minimizing your risks. Hope this helps.

Good Advice Jeff!  With many years of experience, I highly suggest never to buy a property sight unseen. Pictures rarely if ever tell the story.  While there are always exceptions for an experienced investor that has covered their bases as much as possible, this philosophy will serve you well and ensure you don't buy a mistake.  There are no guarantees in real estate investing, and my philosophy is to minimize risks.  As a new investor, it would be advised to take your time and cover all your bases before placing an offer on a prospective property purchase.

Hi Aldo,

I am a long time investor and hard money lender in Baltimore.  I also mentor and coach new investors.  I am new to BP but it seems to be a great community full of valuable information from people willing to share and help.  Real estate investor groups have value as well and you can network to meet others in person and gain further insights.  You may also find yourself some good realtors, lenders, contractors, etc. that offer advice.  I would agree with Ned that multi-family may not be the best place to start.  My philosophy is building wealth over time, not getting rich quick.  While there are no guarantees, you can minimize your risks.  In my experience, row houses are probably the best place to start and learn at a low cost with minimal risk. The key is learning by doing, so you have to get out there and do it.  Don't get stuck on any one book or video as a guide.  There are many schools of thought.   Find some people that have the knowledge and experience you seek, and you will likely find a guide.  There is opportunity out here my friend!

I truly feel for you as I have been exactly in the same place, crazy! I was burned by 2-3 contractors and the rehab took more than a year, same neighborhood. I bought mine for $150k and put $ 150k into it by the end. My concern is that I am not sure if $80k will be sufficient to complete the house? 

So you have had all the inspections to rough in? General, Insulation, Framing, Electrical, Plumbing, and HVAC?

FIrst thing I would do is get a solid licensed insured contractor in there to do a scope of work and estimate to complete the work.  My guidelines for contractors are as follows:

1)Licensed
2)Insured

3)Can show you their current work and quality

4)Are solvent and able to use their own funds to get started on the work and get paid in draws as work is completed - this protects you!  This is how we do it when we make hard money loans too.

5)References

There is no guarantees here, but you minimize the risks and a licensed contractor is liable.

Most investors are looking for a deal and this may not be as attractive as other options they might find in my opinion.  

If $3300 is the monthly rental income, what are the estimated monthly rental costs?? Are the units self contained and separately metered?