Opportunities in South Baltimore (Federal Hill / Locust Point)

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Opportunities in South Baltimore (Federal Hill / Locust Point)

Matt Lazas
Baltimore, MD · Member since 2015 · 12 posts · 3 votes

My wife & I currently rent in South Baltimore, were mid 20's and anxiously looking buy a home.  We plan to ramp up our RE investing in the next few years...My goal is to convert the first home we buy into a rental as a part of the plan

I love the south Baltimore neighborhood's (Federal Hill, Riverside, Locust Point), and it seems like a good long term investment.  I've been heavily studying real estate for only 1 Month (aka reading BP blog & podcasts)...so I have no real experience in these situations. I'd appreciate anyone with some experience who can share their thoughts on what I'm thinking.  Ideally you can tell me all the reasons my idea wont work so i can revise the plan to be smarter:

- The new  construction market seems pretty hot,  There's more 20+ unit developments going up than ever in south baltimore...

-this could mean challenges renting b/c of inflated inventory 3-5 years down the road.  At the same w/ a row home that has parking and well maintained- my hunch is that will never be too hard to rent for a fair price.  (parking is in high demand in SOBO)

- We'd probably put less than 20% down, so our mortgage payment may make positive cashflow via rental income more challenging.  

-Can someone tell me if I'm being an idiot thinking i can make this work? (i dont want to rely on inflation) . 

- And also, any thoughts on qualifying properties to consider based on these conditions?  My most important factor is avoiding negative cashflow in the future

- Demand seems pretty high relative to supply for such a narrow market area,  so it seems challenging to find truly great deals.  

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M Marie M.
Rental Property Investor · Washington, DC · Member since 2015 · 278 posts · 156 votes
10y

When I bought my primary I put less than 20% down. It might have been 10% at the most, but I think most of that was closing costs. So don't consider that a problem. When/if your home appreciates refi and make the PMI go bye-bye.

@Matt Lazas I don't think you're being an idiot, as long as you are careful, and as long as the numbers work. There is a reason retail is way more expensive than wholesale and you may need to learn a bit more before making the plunge. Do you have any handy skills (can you screw in a light bulb/ replace the light fixture)? If not, know you'll have to hire a guy and work with trades people. Buy @J Scott 's book find out about how much rehab gonna cost you. 

The area of which you speak is hot. Maybe stupid hot. When I say stupid hot I mean prices might be a little over-inflated based on future expectations. Don't pay for that. Don't pay for anything where the numbers (not just mortgage & taxes) don't work. 

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  • M Marie M.
    Rental Property Investor · Washington, DC · Member since 2015 · 278 posts · 156 votes
    10y

    When I bought my primary I put less than 20% down. It might have been 10% at the most, but I think most of that was closing costs. So don't consider that a problem. When/if your home appreciates refi and make the PMI go bye-bye.

    @Matt Lazas I don't think you're being an idiot, as long as you are careful, and as long as the numbers work. There is a reason retail is way more expensive than wholesale and you may need to learn a bit more before making the plunge. Do you have any handy skills (can you screw in a light bulb/ replace the light fixture)? If not, know you'll have to hire a guy and work with trades people. Buy @J Scott 's book find out about how much rehab gonna cost you. 

    The area of which you speak is hot. Maybe stupid hot. When I say stupid hot I mean prices might be a little over-inflated based on future expectations. Don't pay for that. Don't pay for anything where the numbers (not just mortgage & taxes) don't work. 

    2Reply
  • Matt Lazas
    OP
    Baltimore, MD · Member since 2015 · 12 posts · 3 votes
    10y

    Thanks @M Marie M.!  Id say I'm moderately handy at best-  I can take care of small things but wouldn't trust myself to heavy repairs.  Great tip on the J Scotts rehab book,  I've heard them recommend it on the podcast- I'm gonna buy it.

    Will being a buyer looking for a primary residence prevent wholesalers from selling me? I imagine red hot markets are not conducive to wholesale inventory...

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  • M Marie M.
    Rental Property Investor · Washington, DC · Member since 2015 · 278 posts · 156 votes
    10y

    Your problem might be cash money. Wholesalers seem to want people who can buy property for cash, and buying with cash is a whole lot different than the way most homeowners buy houses. When I bought my primary it was probably an FHA loan (honestly don't remember) and the house needed to pass some sort of inspection because the seller's had to fix something, then there was trying to get the loan people to approve the loan in a timely manner, etc, etc.

    The investment property in FL I bought with cash was a breeze, bought as is, had an inspector go through with my mom (I didn't lay eyes on the thing till after I bought it) so I'd know what needed fixing, hired an electrician (via Mom) and some other people, a month or 2 later, it was occupied. But I had the money sitting in a bank (savings + cash out from refi of primary) and could prove I could buy it without having to ask anyone for permission.

    So.

    You'll probably won't be buying your primary from a wholesaler unless you can borrow the money from another source. That source probably wouldn't be a regular lender. I don't know if hard money lender would work and their rates are quite high.

    Since you're going to be owner occupier consider homepath.com Fannie Mae's thing. They seem to favor homeowners over investors. I haven't tried them myself but I see there are a couple of properties in the Federal Hill area on the map.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    10y

    @Matt Lazas if you buy at full market in the areas you mention it will be tough to make positive cash flow and even with appreciation may offer poor return in the longer run. 

    But smart investors don't buy at full retail. They find ways to negotiate better deals. Or chose areas that offer better returns.

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