First investment in Baltimore city

4 Replies

Hi, I’m really interested in a home that could possibly be rehabilitated and made in to a rental. It’s starting auction bid is 5,000. There are actually a few homes with this starting bid. The row house is not in the safest area. This would be my first property so I’m not sure if it’s a good idea to try to get the house and flip it due to location. The zip code is 21217. 

@Dakota Lawhorn

Buying a property at an auction is definitely not a good way to jump into real estate investing. Especially if your resources are limited. There's some disadvantages:

1) can be lots of competition on the best projects.

2) sometimes only 1/10 or 1/20 of the properties scheduled actually make it to the auction on the day they are scheduled.

3) The noteholder (the bank) can actually bid against you to try to squeeze more money out of the property.

4) You can't inspect the property ahead of time.

5) You won't always know if it's occupied or not.

6) Many auctions require cash at the time you win the bid.

Most of the guys that go to these things have deep pockets. They don't show up to the auction to bid on one thing. They show up with like 10 different things they might bid on in the hopes of getting one of them.

You should definitely go to the auction to see what it's like but leave your wallet at home for now

@Geordy Rostad You’ve described some of the issues bidders might face with foreclosure auctions. I’m fairly certain that is not what Dakota is considering. 

In Baltimore, public auctions are quite common. Sure, there will be competition on desirable properties sold absolute or with a low disclosed reserve... but the rest of the negatives raised do not apply:

2) unless the property sells pre-auction, it will definitely be offered, because the seller has invested in the advertising campaign

3) banks are not a party to the sale

4) you can inspect the property

5) you will know if the property is occupied, and if so, the existing lease terms

6) most auctions require only ~10% on auction day, balance at settlement within 30 days

Auctions are actually a great way for investors to buy properties for rehab... as well as to meet other investors active in particular areas.

Great comments, but it sounds like what Dakota is asking is not "is purchasing at auction a good strategy", but rather, "should I buy this particular house in this particular location".

Its hard to answer the later question without knowing the actual location.  The 21217 zip codes contains some prestigious neighborhoods like the east side of Bolton Hill, some up and coming neighborhoods like Reservoir Hill, and some neighborhoods with next to zero retail resale market like Upton and Sandtown-Winchester.  My suggestion is to look for retail resale comps within 2 blocks of the subject - that will tell you if the market deems it a "safe" neighborhood that is worth flipping in.  Feel free to PM me the address and I can look this up for you.

@Dakota Lawhorn

 From my experience I know that a house can be flipped in just about any area in Baltimore City. It would depend on who the target audience is. Some flippers buy houses exclusively in urban areas where the prices are cheapest. Then renovate and sell to buy and hold Landlords as Turnkey Properties. Sometimes they even go as far as placing tenants in the property to make it more of an incentivized purchase for a landlord. These properties may not appreciate well. But they cash flow rather handsomely which makes the purchase attractive. So in other words it would depend on who your audience is for the flip that would determine if its a good purchase or not.