Hey Baltimore City Investors,
I need some help evaluating a couple rentals in 21229. They are 3512 and 3514 Old Frederick Rd. They are off-market and I'm talking to the seller now about buying them for 60k each. 3512 already has a voucher tenant in place who pays $0 (the housing authority pays $1200). 3514 is vacant and rent ready.
They've both been renovated to rent standards in 2014. They are up to section 8 standards. They will both rent for 2% of acquisition so my question is not about cash flow.
My concern is about what they'll appraise for. My plan is buy with 0% interest business credit (Fund&Grow) then refinace after 30 days-6 months (depending on the lender). But I'm only gonna get 75% of the appraised value from the lender. I need help in figuring out if these are still good deals. I don't want to get myself in a situation where if I have to sell them for some reason, I've paid more than the appraised value.
Here's a few more details about them:
3512: end unit, 3 bedroom 1 and 1/2 bath, finished basement with 7'1" ceiling; rented by voucher tenant for $1200. 1344 sq ft. Renovated in 2014.
3514: 3 bedroom, 2 full bathrooms, unifinished basement with 6' ceiling; renovated in 2014, vacant, 1044 sq ft
Any help would be greatly appreciated. Thank you!
@Ned Carey , any thoughts?
@Michael Perry that is tough to say without the exact condition. Some areas on Old Frederick are much nicer than others. Near uplands would be better. Based on where yours are I would say you can do better deals than that.
Prices seem to be all over the board. A few nicely renovated houses went 90-100. Most more like in the $35 to 50 range. What yours would appraise for would depend a lot on the particular appraiser and the comps he chose.
I see no comps nearby even near your seller's asking price (as Ned Carey says not knowing the condition of the properties); I see comps averaging around $20K on the same block and the 3400 block.This mean the seller's asking price is including the value for the tenant voucher and section 8 standards. If you have not already visited the properties on a drive-by and/or a personal inspection then do so (this is a must for city properties). I also would make your final closing depending on both property inspection reports (consider this a good investment expense if go for these higher than normal comps asking prices), consider adding a depending clause on getting a current appraisal value as part of your offering contract, and proof of section 8 passed standards for both properties (this is in my opinion you need because the seller is increasing the values based on these properties being at section 8 standards). Take care.
@Michael Perry Ok looking at the pictures I think you are overpaying. It looks like an REO that could pick up for $30-40k. Don't get me wrong, I think it will cash flow. I don't think you can count on getting the appraisal you want.
@Michael Perry Okay, again I agree with Ned the pictures for both 3512 and 3514 looks like you will need to do some light Reno/updates in vital areas like the bathrooms and kitchen for increased value of $60K or greater on your ARV appraisals; also, you must consider using the 7 ft basement as living space, and you must consider the new requirements for rentals in Baltimore City. If you are considering $80K for both units then it looks like it is worth it based on your exit strategy. I don't think it's a pipe dream but you will need some Reno to increase these kitchens and bathrooms appeal (find out what's trending in the market for rentals). Take care.
Most lenders are looking for ARVs > 75K. Find the comp and factor in the cost to bring the units to a comparable level.