Expert Advice My First Rental Property (Is this a Good Deal?)

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Expert Advice My First Rental Property (Is this a Good Deal?)

Sean Byrd
Real Estate Consultant · Miami FL · Member since 2020 · 36 posts · 7 votes

Investment Info:

Small multi-family (3 units) buy & hold investment.

Purchase price: $485,000
Cash invested: $1,000

Zero on Closing plus non closing related expenses 

House Hacking

Triplex in Baltimore, MD. Two story row home turned into multi-unit triplex in Hampden. First (2BD/1BA) and next 2 (1BD/1BA) second and third, all units vacant.

My property management company is projecting

Rents for 1BD/1BA $1275 - $1480  and 2BD/1BA $1400 - $1700
 Previous owner had listed for 475,000 in 120 days ago. I wanted to offer for $430,000 and my realtor told me "No the seller/listing agent said No that is too low" The property fell out of contract twice already and allegedly was asking price.

I had heard good things about rental properties in Hampden from other members on this forum, data city. other databases and decided that it would be a good investment based on those posts as well as my need for turnkey investment property due to me being stations overseas. . Currently my conservative cash flow is $469.00 from occupied units. Cash on Cash return is 193%. Return rate on property 10%. Turnkey property, due to me being overseas for three next four years and no team back stateside. I was thinking DC or other parts of Maryland like Takoma MD but the crime in Baltimore has me worried about zero appreciation and this property high purchase price plus luxury features. I have to buy from the DMV area. 

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Will Fraser
Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
6y

Hi @Sean Byrd, in general when you have a Cash-on-Cash return of 100% and up it's "nothing but net!"  If you consider the asset you purchased as a business it brings some clarity in how good it is:  the business was purchased for $1,000, will throw off some money along the way, has tax benefits, and then in the end will be worth $485k plus appreciation.  Add to this the fact that you won't have to operate it and you've got what sounds to me like a no-brainer!

Well done, Sean!

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  • Will Fraser
    Real Estate Broker · Salt Lake City & Oklahoma City · Member since 2018 · 3k+ posts · 2k+ votes
    6y

    Hi @Sean Byrd, in general when you have a Cash-on-Cash return of 100% and up it's "nothing but net!"  If you consider the asset you purchased as a business it brings some clarity in how good it is:  the business was purchased for $1,000, will throw off some money along the way, has tax benefits, and then in the end will be worth $485k plus appreciation.  Add to this the fact that you won't have to operate it and you've got what sounds to me like a no-brainer!

    Well done, Sean!

    1Reply
  • Sean Byrd
    OP
    Real Estate Consultant · Miami FL · Member since 2020 · 36 posts · 7 votes
    6y
    Originally posted by @Will Fraser:

    Hi @Sean Byrd, in general when you have a Cash-on-Cash return of 100% and up it's "nothing but net!"  If you consider the asset you purchased as a business it brings some clarity in how good it is:  the business was purchased for $1,000, will throw off some money along the way, has tax benefits, and then in the end will be worth $485k plus appreciation.  Add to this the fact that you won't have to operate it and you've got what sounds to me like a no-brainer!

    Well done, Sean!

     Thank you very much for your speedy assistance and review. I have been racking this deal in my mind back and forward. It may require an additional 3K for minor expenses like licenses and admin to get it rolling but overall very good I was thinking, Again Thank you for your assistance. 

    0Reply
  • Cathy Galasso
    Lutherville Timonium, MD · Member since 2016 · 3 posts · 0 votes
    6y

    I would double check the rental amounts. I am a landlord in the Baltimore City and County area. I have a hard time getting quality tenants for an entire rowhouse for what you are looking for one of the units. I agree Hamden is a hot neighborhood so maybe that is the difference. I just did a quick search on apartments.com in the Hamden area. The high rents are for new apartment complexes. Make sure you are comparing like properties before you invest that amount of money. Who is the Property Management company you are considering? 

    https://www.apartments.com/ham...

    0Reply
  • Sean Byrd
    OP
    Real Estate Consultant · Miami FL · Member since 2020 · 36 posts · 7 votes
    6y
    Originally posted by @Cathy Galasso:

    I would double check the rental amounts. I am a landlord in the Baltimore City and County area. I have a hard time getting quality tenants for an entire rowhouse for what you are looking for one of the units. I agree Hamden is a hot neighborhood so maybe that is the difference. I just did a quick search on apartments.com in the Hamden area. The high rents are for new apartment complexes. Make sure you are comparing like properties before you invest that amount of money. Who is the Property Management company you are considering? 

    https://www.apartments.com/ham...

    Thank you very much for your assistance and speedy reply. The property is a row home but converted into a triplex. Yes, I agree for the price comparison for the row home they might be different due to the location enabling the higher rent return plus the quality will match the demand. The multi unit row home is completely renovated and A grade quality appliances and permanent fixtures. This property is completely new renovation from foundation, framing, plumbing, insulation, electrical, and HVAC.This is the reason why the purchase price is slightly higher. Lastly I'm currently search for property management company but have two in the barrel. PMC is "RPMI". I'm personal not a specialist in the Baltimore city area and greatly appreciate your expertise. I will evaluate the rental returns and get two more estimations from three more property management companies and utilize apartments.com. 

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  • Cathy Galasso
    Lutherville Timonium, MD · Member since 2016 · 3 posts · 0 votes
    6y

    Good luck with everything.

    0Reply
  • Gayle Melnick
    Member since 2020 · 80 posts · 66 votes
    6y

    @Sean Byrd

    Is this the Chestnut Ave property? I looked at it when it was on the market.

    I'm not a property manager, but I live in this neighborhood, literally within 100 ft of this triplex if it's the one I'm thinking of. I think you should expect the higher end of your estimate for all three properties. I don't think you'll have a lot of vacancy, there's not much to rent in Hampden so not a lot of competition and it's a popular neighborhood. I agree that you shouldn't expect a lot of appreciation, but Hampden is likely to stay a desirable neighborhood to live in and it never has a ton of rentals available, so if you're trying to make your money on cash flow I think it's a good strategy.

    If you want any other info about this neighborhood, feel free to message me. Good luck!

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  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    6y

    I would not pay 450 on a 3 units even though I live and love Hampden.

    If house is the one on Chestnut like Sean Byrd mentioned, those units are very tight. The rents your agent mentioned will be top and will not go higher than that. 

    When you rent, it might be fine covering the mortgage etc, but when you try to sell, you will have hard time.

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