Rental Property Investor · Baltimore, MD · Member since 2018 · 40 posts · 20 votes
Hello!
I am looking to purchase a multifamily property in Baltimore, MD. I was hoping to use a city program that has great perks but they recently ran out of funding for the program and do not know exactly when they will have the funding again (great timing, right?).
To avoid missing out on what I think is a good deal, I was hoping to connect with an FHA 203(k) lender that has experience in Baltimore with a good track record since I do not know when/if I would be able to use the city program. Any suggestions? I would love to hear your experience with the lender as well, if you have actually used them or know somebody who has.
Investor · Baltimore, MD · Member since 2016 · 3 posts · 5 votes
6y
Hello @Andre M. I have used the Vacants to Value twice. Need to be an accreditate investor with city and you need to agree to improve the property within one year. It is to prevent the buy and hold investor you see so much of in baltimore. This isnt an issue for the flipper unless you keep running into unforeseen isssues, just something to be cognizant towards.
One rehab was an investment success - a SFH in overlea. This was sort of a surprise to us becuase we thought we may have paid too much at the auction ($70,000). Other investors tend to drive the price up on SFH properties out of my comfort zone). It was also a surprise because this was a "as-is" property and when we got in we saw there was extensive flooding damage in the basement. Luckily, we knew a plumber and were able to install a sump pump system that drained out to the alley (a ton of hard work - digging a 3 ft deep trench 50 yards in the classic baltimore rocky soil). Other than that is was just cosementic rehab and did not have to put much more into it total of about 40K in costs.. Sold within two months after acution for 230K.
The other one we thought we could have created a duplex by tearing down the existing shell. but we had a lot of NIMBY and community outrage about its affect on street parking (even though we were going to provide a parking pad on the site). We broke even.
I ended up going with a Conventional loan on another property and using my own capital to fund the rehab. I came to find that FHA 203(k) loans require you to jump through many hoops and is a very involved process on both parties. Although it is a great option to purchase and fund your rehab all while having a low down payment, I ultimately decided against it. However, I did use a program in Baltimore that granted me $15k to go towards down payment and closing cost assistance. The program is called NeighborhoodLIFT Program. I would also recommend taking a look at the Healthy Neighborhoods program. They offer similar grants and loans to purchase and rehab homes in certain parts of Baltimore. I'm not sure of the status of these two programs today, but worth taking a look. Feel free to shoot me a PM if you have further questions.
I hope this helps and good luck on purchasing that multi-family!
Investor · Baltimore, MD · Member since 2015 · 155 posts · 166 votes
6y
Tristan, are you going to occupy the house?
I know you said that you did not use a 203(k), but these loans are for homeowners only. In order to get one, you have to sign that you are going to be the homeowner. It's perjury and possible fraud if you use the loan to flip a property, so be careful in the future.
As you found out, there are lots of programs in Baltimore to buy houses, but again, my understanding is that these are for homeowners so I hope you didn't sign documents to that effect.
These loans used to be available for investors, but that stopped sometime around the year 2000.
The city does have an investor program called "Vacants to Value" targeted to help renovate rundown properties in decent areas, but you do have to jump through hoops as you do with any government program.
Great point to mention that the 203(k) are for primary residences only. I assumed that Andre was looking to live in the unit but that was a mistake to assume that. Thanks!
To clarify, I was able to use a low downpayment loan because I am occupying the property as my primary residence. I am living in one unit and renting out the other two. You can use one of these loans for up to 4-units. Anything after 4, you're looking at a commercial loan. Can't think of a better way to get started in real estate than a house-hack! If you are looking to just flip a property, then unfortunately FHA will not be an option if you do not intend for it to be your primary residence. I hope this helps!
Flipper/Rehabber · MD · Member since 2020 · 24 posts · 7 votes
6y
@Tristan Toliver thanks for the advice. I have looked into both of the programs that you mentioned. One has an income requirement that I exceed by just a little bit. I’ll keep an eye on it however, as they give info sessions from time to time. I am aware of Healthy Neighborhoods and Vacants to Value. Any experience with the Vacants program? I’m curious how they run the bidding, and of course I can’t get anyone on the phone.
Regarding the FHA 203K. I am looking to use it for a multi family/rehab purchase. I agree with you that this is a great way to get started. Bonus if I can combine it with one of the grant programs provided by Baltimore City. I am aware that I will need to live in one unit for a year, and I am fully prepared to do so.
Rental Property Investor · Baltimore, MD · Member since 2018 · 40 posts · 20 votes
6y
@Andre M. Nice. Sounds like you are on the right path. I have no experience with the Vacants to Value program but have heard good things. I would suggest searching it on the forums and visiting the Maryland Investors Network group on Facebook. There are a lot of Baltimore investors in that group and I'm sure someone could provide some insight for you there.
An FHA loan combined with a city grant would be great. If you decide to go the 203(k) route, I would love to hear of your experience so don't forget to post about it! Good luck again with your purchase.
Investor · Baltimore, MD · Member since 2016 · 3 posts · 5 votes
6y
Hello @Andre M. I have used the Vacants to Value twice. Need to be an accreditate investor with city and you need to agree to improve the property within one year. It is to prevent the buy and hold investor you see so much of in baltimore. This isnt an issue for the flipper unless you keep running into unforeseen isssues, just something to be cognizant towards.
One rehab was an investment success - a SFH in overlea. This was sort of a surprise to us becuase we thought we may have paid too much at the auction ($70,000). Other investors tend to drive the price up on SFH properties out of my comfort zone). It was also a surprise because this was a "as-is" property and when we got in we saw there was extensive flooding damage in the basement. Luckily, we knew a plumber and were able to install a sump pump system that drained out to the alley (a ton of hard work - digging a 3 ft deep trench 50 yards in the classic baltimore rocky soil). Other than that is was just cosementic rehab and did not have to put much more into it total of about 40K in costs.. Sold within two months after acution for 230K.
The other one we thought we could have created a duplex by tearing down the existing shell. but we had a lot of NIMBY and community outrage about its affect on street parking (even though we were going to provide a parking pad on the site). We broke even.
Flipper/Rehabber · MD · Member since 2020 · 24 posts · 7 votes
6y
Thanks for the response, @Kyle K. I don’t know much about Overlea, but I am surprised that properties in V2V go for that much. Do you know if that’s the average price of sales within the program? Sounds like you made out in the end though. What were your holding costs on the Overlea project, are they included in the $40k?
On the second project, were you able to do the tear down duplex? Also, what neighborhood was this in?
Flipper/Rehabber · MD · Member since 2020 · 24 posts · 7 votes
6y
Thanks for sharing the lender list, @tomwagner. What was the lending process like? From what I’ve heard it requires a lot from both the seller and buyer.