Baltimore SFRs Ground Rent and Lead Free Cert
Hello BP,
I'm negotiating a sales contract for a property located in 21229 area. My focus is cash flow so I accept the fact that the neighborhood is below average (but not a war zone area). The property is close to Edgewood St & Hilton Pkwy (south side of Gwynns Park). It's 4-bed 2 bath with almost rent ready condition selling for $50K. The seller doesn't have any info on lead paint; the property has ground rent of $150/year.
My questions are:
1. How much will that roughly cost to have lead-free certified and how long will that usually take? I can't seem to get a straight answer from several PM companies I spoke to.
2. Is it worth to spend $3,100 to have ground rent removed at closing ($2,500 for the sale price, $350 for attorney, $250 for recording).
3. What do you think about this neighborhood overall and whether the listing price is reasonable. I noticed there were some flips sold in the same block.
This is my first investment property in Baltimore so I'm eager to learn as quick as possible. I appreciate your help very much!
@Annie Li I'm a relatively new Baltimore investor. After my first buy there I can pass along a few things:
1)Baltimore is block by block. Just knowing the neighborhood or area is not good enough. Houses on my street just 2 blocks away command at least $150 more in rent.
2) lead paint certs just depend on the property. I spent way more on preparing the place for the lead test than I did on testing. Unless you are doing a full gut renovation it's unlikely you can get a lead free cert. Your other option is "full risk reduction" which means you must remove any Peeling, chipping or cracking paint from anywhere on the property. Then clean everything really well then get a lead test. And if you fail get retested. There's usually am inspection fee plus a per room swab fee. But again the more costly issue is addressing ALL the Peeling, chipping or cracking lead paint. I liked the company is used because they come out 1st and do a walk through. They give you a detailed list of everything you need to fix then you get to work. Then that's only what they check when they come back out to do the test if you call them back within 30 days
If you're not onsight, definitely get some boots on the ground to help.
Good luck!
Kim
1. You have different levels of lead certs. If you make your house lead safe you will need another lead cert every time you have a new tenant. Lead free cert is forever. Cost to have a company come out is $250-$350 depending on who you call and which cert you are going for. Once they give you your report then you will have to either remove or encapsulate any lead paint that they find. Depending on what they find you are looking at a few thousand dollars to tens of thousands of dollars. I would not purchase the house until I had a lead inspection and knew how much it will cost to get a lead cert. Without a lead cert you will not rent to section 8 and eventually the city will fine you.
2.I would try to redeem the ground rent at a discount.
3.I have been installing roofs for over 20years in Baltimore so I am quite familiar with the city. This isn't the best area but it certainly isn't the worse.Some drug activity in the area but they move the corners they are selling off of every few months. I would be more concerned with the cost of getting the lead cert than the area assuming you are buying for cash flow.
Thank you very much for your reply. After talking to another PM, I think I will just get lead-safe certificate now and will do lead-free remediation when the condition of the interior is not as nice as it's now. I will also proceed with removing ground rent since I plan to hold the property for a long time, it also helps a little bit while selling the property.
Depending on the age of the house there may not be much lead. If it was built after 1945, you may be able to make it lead free (or limited lead free, which means no lead paint on the inside) for not much cost. If it is an older house it could be a lot more. Neil Roseman from LeadProbe is a great guy to talk to and probably can give you a good idea because he knows the city so well.
Ground rents can be redeemed for 12% or 6% cap rate depending on when they were created. So redeeming it would be the same as investing at that rate. This does not include recording costs etc. So a ground rent may not be worth redeeming other than eliminating the hassle of paying every six months. If you can buy it at a discount then it may be more worthwhile.
Edgewood doesn't hit Hilton Pkwy so I am not exactly sure where you are referring to. If you are talking about north of Edmondson Ave. I am not excited about that area. Just a few blocks west however I like and own a house on Lyndhurst. I do now lots of landlords that like that area and do well there. $50K seems reasonable but it depends on the age of the systems. If it is a dated house you can do better.
If you are talking south of Edmondson Ave that area is Allendale and varies quite a bit from on end to the other. As I recall I didn't like Edgewood there. I would rather be north of Edmondson Ave.
@Ned CareyThank you very much for your reply. I have decided to hold off investing in Baltimore due to tenant-friendly laws and hassle of lead paint requirements (heard horror stories of landlords being sued because of it).
If you aren't local and don't have a trusted boots on the ground right hand person I think your decision to hold off is the correct one. I live about 45 minutes outside the city and decided to invest there. I spend a year researching neighbors and narrowed it down to 2-3 different ones then spend a couple of months driving those neighborhoods and looking at properties before buying anything. Baltimore is really NOT for an absentee landlord without a trusted crew in the city.