All Forum Posts by: Tim Jacob

I think a from an equity standpoint the DC area is better in general.  There is usually 1 or 2 duplexes in Baltimore available in decent areas.  There might be 1 somewhere in between in Annapolis or Frederick but most likely Baltimore city.  A 3 or 4 unit is less likely.  This is especially true turnkey.  Going to DC renting the basement sounds great a few things though.  The main thing is understanding construction costs on a basement conversion like you are talking.  Though DC suburbs or proper have a higher percentage of areas that are nice not everywhere is.  Thus is especially true in PG County but can still extend into a few parts of the city or the other parts of the DMV.   There is going to be a premium for light and a lot of basements dont have it.  You can put in an egress window but thats going to cost you atleast 6 or 7k. I would not recommend that as a job to diy other than digging things up and maybe the drainage andvl retaining wall.  You dont want the house to fall down.  You would need the right style house where both units have acceptable interior egress without getting into each others hair or you are really talking about a roommate in which case you will need to drop rent and might not like the lack of privacy for you and your wife.  Creating a brand new kitchen, brand new washer/dryer or relocating one, bedroom space, walling off things, altering stairs, etc costs money.  A good thing is there is a lot more inventory to pick from but to find something that checks enough boxes I think you are still spending a bunch of money to convert a single family.  This doesn't include an adu conversion which can only be done on single family detached vs a townhouse which doesnt have acceptable parking unless you can get some sort of variance which I really wouldn't just hope for before buying.  Most affordable places will either be townhouses or not have an acceptable amount of space for that. 

Get a local agent that knows what they are doing and get something that's close to turnkey.  Have realistic expectations on infrastructure improvements of old buildings and if they will be needed.  Get something in an A or B class area and a good agent and you should be able to tell whether they are good during a time as a buyer representative and they can then lease it for you and you might be able to manage remotely and save on the pm fee or a pm company will take it on.  You get in to lower stuff because it's cheaper and you do this enough and your going to run into going to court for non payment.  A pm company will not take on a D grade asset and if C grade will not save you from the bad tenant related costs.  The way things are progressing I would recommend avoiding that entirely.

I have a good amount of experience managing and selling Baltimore multi family places for me and others.  What I would say is a good 4 unit appropriately priced come around a couple times a year.  Usually there is 1 or 2 duplexes that are around that are in good areas and priced well.  Some are mislisted as single family.  I would recommend looking at those as well.  You really don't want to purchase a 4 unit in a bad area just because it's 4 units and not just 2.  A pm will not save you if you do that.  Keep on mind many places in the city are old with old infrastructure.  Understand if you want to buyba house in a year the maintenance or remodeling costs could really get you.  Thus get something in decent shape.  If it's on radiators leave them alone as the cost to convert is way too high.  You might find something that is turnkey as a multi in good areas but I would be patient.  There are a few I see that are mislisted now but not 4 units.  You might see a decent 4 unit that is out there but expect a bidding war.  Some neighborhoods are B grade but not brand name ones.  Thus I would get a local agent that really knows the city.

1 thing I would say is even in Baltimore inventory can be an issue.  Especially for 3 or 4 units compared to a duplex.  It's better to get a duplex in a good part of town compared to a 4 unit in a bad part of town.  Usually a decent duplex or 2 are around at any given point.  The 3 and 4 units come around less often.  Also keep in mind the age and infrastructure charges associated with a property.

Not all of it is that bad. I would say the part closer to downtown is pretty rough.  Think of Belair and North as being horrible.  That and other parts of that part of 21213 closer to downtown  were shown in We own the City on HBO recently bc they are indeed really bad.  As you go on Belair Rd northeast of that intersection it starts getting better I would say by Belair and Erdman which is right in the middle of Belair Edison things have gotten to a C grade asset.  Even then I would try to be half a block off Belair Rd but I have managed properties in that area and have not had many issues there.  

21213 fluctuates for asset quality.  Years ago I dealt with D grade in 21213.  I don't and won't anymore.  C grade is possible as you go away from downtown and North Ave and more into northeast Baltimore.  Belair Edison is not bad.  As you get off Belair Rd North East of Erdman you should be alright.

For your price range you are definitely C grade at best.  I would recommend 21239 or Dundalk/ Middle River / Essex in the county.   Know things are getting more and more tenant friendly and you will not be able to get that tenant with a 700 plus credit score you don't have to worry about like in an A or B grade asset.  Your taking risk and though it can work allocate more to variable expenses than if you high graded things because overtime they will work out that way.  Things for the most part are back to normal and have been a while compared to the pandemic but the c and d grade crowd got killed during that.  D grade will not work at all and though C grade can just be aware. 

You will need to give ample notice.  In Maryland minimum 1 month.  Certain municipalities have longer requirements.  I would give minimum 2 months notice.  I wouldn't give much more then you need to otherwise they might skip out in payment.  The notice needs to be in writing.  I usually email and give notice by certified mail for renewals.  Same deal here.  Your lease might specify other things about that.  You are correct Anne Arundel county you don't need a reason though you do in other places like Baltimore.

A reduced rate would mean reduced service.  That would lead to people who always go with the cheap getting the bare minimum home inspection, title work, etc.  These are all bad ideas.  The argument was that the buyer will pay their agent directly instead if the seller paying both.  Trying to haggle the buyers agent down to less than 2.5% is ridiculous.  By the time the agent is done working between showings, writing contracts, negotiations and inspections irs weeks of work.  They ain't working for minimum wage and never will.  You get what you pay for not sometimes but all the time.  If you nickel and dime the agent what you really want is to be swindled somewhere in the transaction whether it be the inspection negotiations or title work being done wrong.  There are plenty if things I see lately where I get poor service because done corporation has some free extra service with purchase of something but it would have been better if I just paid for the so called free thing and got what I actually wanted.  That's where this is headed if you think the answer is let's undercut peoples pay more and more.

The 2% rule is hard to find as others said.  1% rule is possible but I would be less about that and more about asset quality.   It's far better to be in an A or B grade area with .8% where getting a tenant with a 700 plus credit score is possible with a couple weeks of leasing the property than getting something that hits  1.8% in a D grade area that guarantees you will never get that tenant and will always be taking a greater risk and will not find reliable pm as a result.

I think this was a great post.  It can give people a realistic idea of how things can go in a C grade asset class.  1 thing to note is how difficult is it to lease a property.  The sort of vacancy you had are very realistic.  If you hire a property manager they will ofcourse try to find the right tenant but are not going to work for less than minimum wage to do so.  Hence the issue with C grade rentals.  I will say if you get into a higher asset class it really won't matter near as much if you happen to be in a landlord friendly area or not as long as adequate leasing is done which at that point a realtor or pm should be able to do for you.

The biggest lesson about asset class is the key.  As times goes on things will get more tenant friendly in all areas so the biggest thing to do is not rely on having that save you because you are expecting legal troubles.

Whether you stay in small single family or go into multi family I would recommend keeping in mind the asset class and physically go to the properties you will be buying to ensure you are buying what is being presented.

I would stay local if possible or semi local within a state or 2 to ensure you can control things easier.  I understand a low price point is great but I think you learned about the real ramifications from this property you just sold.