All Forum Posts by: Seth Hochberg

Welcome to Bigger Pockets! If you search on BP for "Need a contractor" you'll see that many people ask this question, but few people respond with an answer (in any market, not just Baltimore). This is true for several reasons. People don't want to give up their contractor on a public forum. Also, what constitutes a good contractor might change over time. I might recommend person ABC who is fantastic in 2021, but not in 2023. 

Unfortunately, this piece is going to take a little more effort on your part lol. Definitely ask questions on BP! Connect with other investors in Baltimore! Go to meetups (there's a weekly meetup at Spirits West on Fridays at noon, which is fantastic). Join the Baltimore or MD real estate investing groups on facebook - that's a little more personal, and a great way to network. Once you've networked with people, you'll find people are much more willing to share contacts. Hope this helps! Wish you lots of luck!

Welcome to bigger pockets! I also live in (NE) DC and invest in Baltimore, but I lived in Baltimore for nearly a decade before moving here. I actually used the extra time I had during covid to finally pursue real estate, as it had been on the back of my mind for years. One year later, I closed on my first property. 

One tip I can share: the most important thing you can do to get started is find an agent who invests themselves. Interview a few agents, and go with the one you feel is the most promising. This one step will get the other pieces moving, and will propel you from just "researching" to actually doing something. Happy to answer any BRRRR-related or Baltimore-specific questions.

Nice, I've BRRRR'd my first property last year (Belair Edison), and looking to buy number 2 and 3 this year. There's so many places in Baltimore to invest, so I look all over. Are you guys located in Baltimore?

Happy to help! What neighborhoods do you have questions about?

Congrats @Alaina Hinds and @Account Closed! That is super exciting. I'm also an investor in Baltimore and am happy to answer any questions! Where in Baltimore are your properties? What real estate strategy are you guys employing? BRRRR? Buy and hold? House hack?

Congrats on having 30k saved up! The BRRRR method is indeed wonderful, but takes some experience to perfect. How do you get experience? Well by doing it. The tricky part is that you need some sort of safety cushion. In my mind, that comes in two flavors - either you have a larger capital cushion (by having a lot more capital) OR you have a mentor who's really invested in walking you through the process. As @Matt Ternullo suggested, you have two options: to do an FHA loan (which is not really going to be a BRRR) or to use a Hard Money Loan to BRRRR. I would really recommend the former. I know BRRRR'ing is the sexy thing to do in real estate these days, but since you're young and starting out, I think they key is to scale up your savings/earnings each month. The FHA route is much safer and a good bet to start off with, than BRRRRing your first property with only 30k saved up. Let me illustrate with examples.

1) FHA LOAN: With an FHA loan, any American can buy a home for only 3 or 3.5% down (I forget). I don't know how expensive homes are in your market, but that means your 30k can buy ~1M dollars worth of property. Say you do this to buy a triplex or quadplex, and live in the worst unit and rent out the other two/three. Now you should be making some money each month AND be living rent free. If you factor in the rent you're saving, this is a fantastic investment. This might mean going from paying $1500 in rent to living rent free and making $500 a month after expenses (completely spitballing the numbers here). Now that $2000 extra a month (or 24k a year) is yours forever. Even if you mess a bunch of steps up, you're still going to wind up on top. If you do it right, you should have your investment back within the year. Now that you've escalated your savings, you've set yourself a solid foundation to start trying the BRRRR method. OR you might think that since that was so easy, after a year you might do it again! This is a very viable house-hack strategy that I would recommend fully to anyone with some savings (but not a lot, like 100k-200k).

2) BRRRR with HML LOAN: Unless you can borrow money from friends/family, your option here is to get a Hard Money Loan (HML). They will require you put down 25% of down payment. So that leaves you looking for 100k homes. Where I invest, in Baltimore, this is perfectly fine. However, I doubt that will work in Florida. but let's say it does. You spend 30k and you buy a 100k property that needs 50k of work. The HML lends you 70k for the house and 50k for renovation. Let's say the project stays under budget, but the appraisal comes low. You need the appraisal to hit 200k to get your investment back. But if it comes in at 160k, you won't even be able to pay back the HML in full (and you've lost the entire 30k by "leaving it in the deal". I don't know how easily you can save another 30k - that's the issue. You're making maybe $200 extra per month in cash flow, but you lost your valuable asset - the 30k in capital. Even if you pay off the entire HML but leave 15k in the deal, you've lost 15k of capital, but gained only $200 in cash flow per month. The whole exciting part of BRRRR is that you can repeat the deals with high velocity. If you are starting out with relatively little, any time you leave a bit of money in the deal, it completely undermines the speed at which you can BRRRR.

I would strongly encourage the FHA route to build a strong foundation. So that if you do decide to BRRRR, and you lose money, at least you can quickly recoup your investment from the rent of the home you originally house-hacked.

Hope this helps! Again 30k is much more than I had at 21 years old, and it's a great starting point. The BRRRR is a great tool, but try not to get drawn into all the hype. Real estate should be a get rich slowly method.

Hope that helps. =)

Yes. Having done a grand total of one BRRRR, I would say the two hardest parts for beginners are estimating renovations and estimating ARV's.

For estimating renovations, I read J Scott's book, "The Book on Estimating Rehab Costs". This is a great starting point and a helpful mental model of how to think about renovations. But nothing compares to having an agent who knows how to do this. The most important step is finding a quality agent that has done many BRRRR's before. You walk through a property and you let him/her point out everything that needs renovation and you ask questions at every step of the way. Oh it needs a new exterior door? How much do you think that'll cost? And you write it down! Oh, a new HVAC system with duct work? How much will that run me? And after you've viewed a couple of properties, it'll all come together. Lots of patterns will emerge. But take notes because you will forget.

For estimating ARV, I go to Redfin/Zillow. I look at homes sold in the last 6 months. I match the number of bedrooms and bathrooms. I roughly match the square footage. And I zoom into the neighborhood of interest. And look at every house in the neighborhood. How are they comparing? Look at the pictures? Are there low ARV's, but the houses look pretty? That's a bad sign. It's not an exact science. You can also ask an investor friend your area to share an appraisal document. And you should pour over that document to understand it. Understand the different class types (C1, C2, C3, etc). How much is a brand new kitchen worth in an appraisal? Etc.

Hope that helps.

Congrats Phil! I was born in raised in Bay Ridge, Brooklyn, so probably not too far from your home. 70K plus any equity you can grab from a HELOC will get you pretty far in plenty of areas. I currently invest in Baltimore, but I would be wary of investing there without being intimately familiar with the place - at the very least, you should finding someone there (eg an agent) you can fully trust. But it doesn't sound like you were interested in that area anyway.

Since I can't speak to any other areas, I would recommend spending lots of time on RedFin/Zillow to get an idea of what areas match the price point you're looking to invest in. You can ask on a public forum, but it completely depends on what your price point is. Are you looking to invest in million dollar homes or 200k homes? And then most people only know where they invest. I would scour BiggerPockets, entering the cities/towns that you might be interested in and see what people are saying. You can ask here, and someone might enthusiastically exclaim, "INVEST HERE!" but how much credence does that have - how much should it have? Once you find people who invest in areas at your price point, then perhaps you should initiate, network, and see if the area makes sense. 

Best of luck. If you have any BRRR-related questions, independent of location, I'm happy to answer them.

I'd agree with the figures Jon gave (he should know - he's had plenty of experience!). I usually estimate $7k for HVAC. 

I've only done one BRRRR, and got wrecked by a low appraisal. The appraiser called me and I realized afterwards, that I was completely unprepared for that conversation. You should be prepared before that conversation to say exactly what was done (obvious hint: bathrooms + kitchen matter more than anything). I talked with an experienced investor friend of mine and he suggested to exaggerate the rehab costs. I don't know how ethical that is, but it was an interesting suggestion. I do feel my appraiser simply added the the purchase + rehab costs and found comps that verified that total.