All Forum Posts by: Sebastian E.

@Tim Jacob The trick now is deal flow. 2 years ago you could pick those up in Belair Edison all day. Now you need to find one that needs some work in order to start off with instant equity. I am sure some folks have some ideas of where that next area with similar fundamentals may pop up. 

@Tyrone Marson I am no expert on neither the east side. My portfolio is buy and hold on the West Side of Baltimore. 

The challenge as has been discussed on the forums many times is that you can get caught on these deals. I have seen it happen with clients that the wrong block costs them 20-30k, which is what their profit was going to be. Throw in one other major mechanical issue and all the sudden your great deal has you 10k in the hole. For a lot of folks that ends up being their one and only deal and they go on the rest of their life talking about how investing in real estate is a terrible. 

I lost 10k on one of my early deals then broke even on 3 of them after that. 2 of those 3 were pretty much entire renovations. Then the 30 and 40k rips started coming along to get things back on track but I would be extremely cautious. 

As for your question: I think your first focus should be on building quality product off the bat. If you are doing flips in Baltimore you need to have an edge on your construction, so that it is a place people would feel comfortable and want to live. That means new drywall, duct work and central air and heat. If you can execute on that and put it in an area where potential buyers feel like they are in the path of progress and can be relatively comfortable during the wait, I think that will put you in a good position. North of Patterson Park could work but again you may want to check in with some folks who know of people who are having more success over there.

As for BRRR, the Belair Edison area is good but it has also become saturated with the investor activity. I believe it is because many lenders are willing to lend over there because the areas are more stabilized and the values are often 100k plus post renovation, so it makes a lot of sense for investors. Also, you can get good voucher tenants at 1300+ a month.

Happy hunting.

Seb

I have a client who has a house with two houses (main house and guest house in Clarksburg MD in Montgomery County. It’s on just over 4 acres but it most likely a gut or tear down. Can anyone help me out with figuring out if a Subdivision is feasible or advisable for his situation?

Thank you in advance for your thoughts.

Seb

@Joe Norman It is a good question. I have certainly seen the model work on a BRRR buying at 60k renovating for 40k and having it appraise at 140-150 with a $1300 section 8 renter in there. I have a client who does those with fair regularity on the East Side. If we can derive one thing about Baltimore City from the many posts on the topic, it is that Baltimore is a tremendous value play for rental investors.

The question about where to do flips or if a flipping strategy in Baltimore is generally worthwhile is a more interesting evolution of the topic. Because at the heart of the question--in the way I understand it--is whether people are wanting to move to Baltimore to live. And if that is true what is driving their decisions about where they want to be and how they want to live.

When I lived in DC they path of progress was generally fairly obvious to those who were paying attention, and even to those who weren't really paying attention.

My experience in Baltimore has been that the market is generally much more fragmented. I have heard of flippers finding pockets of areas where they can execute flips and make a worthwhile rip of 50k plus on a renovation. I have also noticed that the areas where one can make those higher returns isn't necessarily the areas that you'd think basing your decision solely on whether a neighborhood is up-and-coming. Because of the aggressive rise in real estate values over the last 10 years, many people made money simply by entering the market. Now we seem to be at a point where less competitive players will be forced out of the market because they can no longer count on appreciation.

With that said, I like areas around the downtown. Seton Hill, Hollins Market, Union Square. (I am biased because that is where my most of my properties are). I still find the relative utility and value to be very high for buying into high quality building stock. It is looking like we are getting some movement at Hollins Market and the Lexington Market project is moving forward too. So it could be good if you can stick it out for 5-7 years to buy into a neighborhood like that. I think Upper Fells and areas around Highlandtown and JHU hospital fit the bill for that too. 

For doing renovations and resales, I am intrigued by areas in the Northwest of Baltimore. You can get SFH with a yard and be further out from the city in a big house for pretty cheap. My sense from the market now is that if you put on a really good product people will buy it. COVID-19 has led at least some people to believe that this time may represent a more structural shift in the way we organize ourselves and our economy. If it is even partly true that more people will be working from home, my sense is that providing a nice renovation in a decent area with a yard could be the way to go because you could appeal to a broader spectrum of buyers.

Full disclosure: I am just guessing. 

If you are coming with no experience and you hire everything out through a GC you will most likely about break even or lose money. 

You will need to settle on an area where you can get deals below 15-20% below value and then you will need to establish how you are going to execute your renovation for a reasonable price.

If you go with a reputable, established contractor you have a chance they will be fair and honest but you will pay a premium for that. This will almost definitely ensure that you don't make money.

You can go with a cheaper, less reputable contractor who may be cheaper but less reliable and more likely to steal from you.

As for your original question: your challenges are several. You have to find the right neighborhood, get the right deal, and then manage doing a project while sharks are circling below you and buzzards above you. The situation I described with service providers is very real and the city doesn't do small developers any favors on the regulatory side. 

If you are very serious about it, I would settle in to the idea that it takes a few years to establish a business and if you decide on Baltimore you have to be willing to take your lumps along the way. 

I had a judgement on an eviction before COVID and am waiting for the sherif to schedule. Does anyone know when that work will resume? Or is the stay on evictions even for pre Covid evictions?

I was actually between Richmond and Baltimore before deciding on Baltimore at the time (2018). There are obviously good deals in each place. I have a property in DC, so I wanted to stay close to that one and Baltimore is/was cheaper to buy in and a little closer. I think Richmond will benefit more from higher price points in DMW than Baltimore will because from my experience Richmond is a more liveable city. I have spent some time in Richmond and I think the quality of life is higher there. 

I was kind of betting on things getting better in Baltimore but I haven't sensed a whole lot of momentum in the areas that I have been targeting. I have done well on cash flow but I invested in some lower yielding areas hoping to catch some appreciation but no such luck. Unfortunately, I am not all that optimistic that things are improving either. Perhaps the city government can find a way to reduce barriers to entry for investment but I haven't seen much progress there. 

Ok, to be clear I don't think we are looking at the end of large metropolis cities. I do wonder, however, if now that folks can work more easily virtually, whether the circle around large cities like Seattle, Boston, Philadelphia, or San Francisco may widen out to include tier 2 (50-100k population) or even tier 3 (20-50k) cities. I have been traveling to some of these cities and have been really surprised how livable many of these cities are. Cities like Harrisburg, or Lancaster, PA are great examples with very high standards of living and much cheaper housing prices than you will find in Philadelphia or DC. I find as  a 30 something year old these cities have many of the things that I am looking for like cool coffee shops, accessible nature, walkability and really cool housing stock.

So, my question to fellow BP'ers: What do you think of this thesis? I am interested in critical feedback as well as recommendations for some of these cities to visit. I am nearly finished with my camper build out and am ready to hit the road. Thank you all for your feedback. 

Thank you all for taking the time to respond. What it comes down to for me is that I see an incredible future for Baltimore. And living here in the city in the present here is extremely difficult for the folks who are clearly in marginalized, substandard living conditions. This in turn makes it a difficult place for people to live here while the city continues to improve. 

 I have been a little bit humbled by the what looks to be re-election of Sheila Dixon. On election day, I asked a guy in the park who he was supporting and he told me Sheila Dixon. "Everyone deserves a second chance..." My sense is that many in Baltimore need a second, third or fourth chance so she is the person who best represents that for the citizens who live here. In a democratic process, I accept that.

I have enough properties now to sustain myself, so my next plan is to stand up a full service turn key rental business here. I will try to update you all on my next endeavor and I hope to have good news about the success of the business. 

Seb

I am interested in hearing thoughts on Baltimore City as a place to invest in real estate. I have been optimistic of late with how constructive the manifestations have been here relative to the other areas of the country. I also think we have an opportunity with a change in leadership that is coming. Would be interested in hearing others thoughts.