Investment Info:
Single family rowhouse fix & hold investment in Baltimore, MD.
Purchased: March 2020
Purchase price: $65,900
Cash invested: $35,000
Rent: $1,400
Sold: October 2023
Sale Price: $185,000
Here is a full recap from 3.5 years ago on buying/rehabbing/renting my first deal.
Lessons learned? Challenges?
Market tenant:
My first tenant was great. Until she wasn't. $1400/month. After paying rent for about 5 months, I guess she lost her job and slowly stopped paying rent.
I learned about the Baltimore City Failure To Pay Rent (FTPR) process. I learned about broken promises. I learned about rent escrow. I learned about professional tenants. I learned about evictions.
The Baltimore City Court system is also incredibly backed up, slow, paper-driven and archaic. (Hire someone to do these things for you)
My tenant finally moved out in the middle of the night, a few weeks before the eviction was scheduled to occur. We went through with the eviction process, regardless. The Sheriff and I officially re-entered the property early one morning. I changed the locks.
I then filed a money judgement lawsuit to try and recoup some of the lost rent. Almost $12,000.
I hired a skip-tracing company to track her down, since she left no forwarding address. After 3 unsuccessful attempts with a process-server to serve her the lawsuit, I gave up and decided to move on. Most people said that even if I did find her & serve her, there would be no $$ recovery. Getting blood from a stone.
C-class areas are challenging. Tenants can be liars and outright thieves.
Section 8 (tenant #2):
With my first tenant finally gone, I was able to clean the unit and rent it to a Section 8 tenant.
Finding a S8 tenant is very easy, just list your property on GoSection8.com and you'll get bombarded with inquires.
I setup a scheduled viewing time on a Sunday afternoon, and had everyone apply electronically thru Apartments.com
I sorted through the candidates applications, credit and background checks.
Amazingly, my ultimate selection had been on the S8 waiting list for a voucher for almost 11 years. She was super thankful!
Section 8 (Housing Authority of Baltimore City) typically pays 70-80% of the agreed upon rent (calculation based on income and other factors) and the tenant pays the rest.
In my situation, S8 set the rent at $1350, with the tenant paying about $400. This was lower than the $1400 market tenant but at least a large portion was guaranteed by Uncle Sam.
Tenant #2 was generally better but she still feel behind on rent and paying the water bill. One excuse after another.
After 2 years of this, I decided to not re-new her MTM lease.
Next phase:
I seriously considered doing either a medium-term rental (travel nurses thru FurnishedFinder.com) or Rent-by-the-room strategy with college students. Both promised greater cash flow. But my unit lacked central air conditioning. It would have been very expensive to replace all the ductwork in the house (undersized for A/C) or to add 4 mini-split A/C units.
After seeing another house across the street sell for $199k (a great comp), I decided to sell.
I will be rolling these profits into other larger deals, most likely, outside of (the very blue) Maryland.
I've joined a few multifamily focused mastermind groups that have really opened my eyes about single family rentals, and their lack of scalability.
Wins:
Walked away from closing with a $100,000 check.
Monthly cashflow was so-so, but the appreciation was fantastic.
Experience, connections, & confidence to do larger deals.
Summary:
Would I do it again? Yes, absolutely. That was where I was at in my investing journey.
Would I recommend buying a $66k SFR in a C class area? NO. Try to find a bit nicer B- area, that attracts better, more stable tenants.
I am glad I went through this process, and I feel that I 'graduated'. But now it's time to scale up into larger asset classes with other partners.
