How to approach a Property analysis if you don't live in the area

Question

Hey Guys, i have a property in Baltimore Zip code 21224 and while analyzing it, it makes perfect sense if i can buy it Seller Financing but if it's conventional 25% down then the cash on cash is very low. The numbers are,

Purchase Price: $90,000.00 Purchase Closing Costs: $1,500.00 Estimated Repair Costs: $5,000.00 Total Cost of Project: $96,500.00 After Repair Value $90,000.00

I said the ARV is still worth 90k bc properties in that area are not valued very high. The owner owns 90k on the house so it's not like i have any room to negotiate a different deal. My questions is how do i know if the location is good since in Baltimore some streets are good and others are really bad. The owner had a long term tenant in there for about 12yrs at rents of 925 but market rents are about 1100 so if i do some rehabs, i may be able to push rents. This will be my first investments so i want to make sure that i am looking at the right places. What are things i need to verify to secure this as a good investment?

Nathan Gesner · Answer

You're wanting to spend $96,500 to get a $90,000 home? Don't try to fit a square peg into a round hole. Pass!

Sean Monahan · Answer

@Kenny Kamdoum

Just sent you a message. I live in this zip code and would be happy to help you with any questions.

Ozzy Sirimsi · Answer

It is Baltimore, anytime you buy a houses for 100K range and your rent is $925, even with the renovation is $1100, it is a mistake right there. It should be min $1300, I am not getting into if house worth 90K or not.

Brendon Grover · Answer

So your ARV is less than the money you're going to put in? That alone is off to a bad start. If your numbers are only going to work one way you may want to re-think this deal. Doesn't seem like a deal to me. A mistake people make is getting too fixated on one property and wanting/hoping to make it work, remember if the numbers don't work then just move on!!! Not every deal is a good deal!

Tyreese Brown · Answer

@Kenny Kamdoum I am by no means an expert. But it looks like you are about to make the mistake of buying the house at it’s full value with no equity to leverage in the near future. There is always room to negotiate depending on how motivated the seller is. Based off your numbers, personally will not pay 90k, I would put my offer somewhere around 65-70k max.

But to your question, everyone will tell you over and over again that you need to physically go to the area you want to invest in order to get the most accurate assessment of that area. Baltimore is literally a block by block city. Just merely having a zip code and address won’t give you the best analysis.

Also, when you do get to see the neighborhood, some people will tell you to use rules of thumbs like “would you let your wife jog around the neighborhood.” This may be good for some, but myself, growing up in the Resevoir Hill/Penn North area of Baltimore in the 80s and 90s, that rule of thumb means very little to me. I personally am not afraid to live, jog, or invest in these areas. You just have to understand the community. But I won’t get on my soap box about that here. Set your criteria, stick to it.

Al Williamson · Answer

Hello Kenny,

You need to make some night observations to see what’s going on in the area and have the street smarts to pick up the clues. If you don’t have the skills I would retain a local expert who can guide you and has history in the area. People that get in to areas that they know nothing about on the local level and up in trouble. This could be a great investment but since you are asking us question that indicate you need to bring on local expertise to shore up your street level knowledge.

How to approach a Property analysis if you don't live in the area

How to approach a Property analysis if you don't live in the area

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