Good Afternoon BP!
I am working on getting started in REI, I have been particularly interested in the Baltimore area for my first property. Could anyone help me get started on what is the best way to get started. Also is it best to purchase a solid row house for 30k and rent it out with a little rehab or buy a shell property for cheaper price tag and build it up as a new property.
Any advice would be most appreciated!
Umm, anything your going to get for 30k in Baltimore, is probably going to need a serious rehab, unless your buying in the most dangerous areas. If you want any kind of quality tenant market or section 8, a property has to almost be brand new. Properties I'm buying for 30K, I'm putting 30k into, for a total of 60K. I see tons of newbies think its easy to buys shells for 10K or 15K and they could put 10K into it, and rent it out. Then they fail there occupancy inspection and end up selling the property for a loss or spending 40K to fix everything.
@Joel M. welcome to BP! As @Ian Barnes mentioned, a lot of newbies (myself included) think that the 50k and under properties are a steal but the reality is you need to really know the area and your costs in order to succeed at these. It may also be even harder if you don't have a decent contractor that you have worked with in the past. I would say to start with something that is in a nicer A or B neighborhood that only needs cosmetic work. You'll learn a ton , it will be easier to manage and you'll start building a nice network of contractors, vendors etc. (That's what I'm doing right now)...
Welcome to the site.
Good luck to you & I'll see you around the forums.
Thank you everyone for the valuable information. I really appreciate the advice. I will definitely look into it more before purchasing a shell house.
If I were starting out with the goal to buy and hold, I would definitely go with something that is rent ready or close to rent ready. Getting into a rehab project can be pretty dangerous if you don't know the costs or what to look for. Just pay a little more for something you can get someone in soon.
Thanks @Michael Paris. @Joel M. Where you invest is going to depend a bit on how much capital you want to deploy, what your goals with investing are, and your risk tolerance.
Ive got no qualms with the people who buy $30k row houses in Baltimore...but I think they have a higher risk tolerance than myself. I also think we have some pretty cheap opportunities pretty close to DC. In Laurel MD there was recently a condo sub $50k (Needed work, some mold issues) that went under contract that would likely rent for $1150. ($260 condo fee). That is a pretty nice ratio I think, without some of the risk involved in the $20k neighborhoods in Baltimore. Though this property did come with it's own risk (Was it warrantable? As well as the general condo risks)
I would recommend against the shell idea unless you are an experienced rehabber. Permits can be a bit of a nightmare in Baltimore. Also keep in mind the insane real estate taxes in Baltimore....when you consider those, the cheap prices in Baltimore might not seem so cheap.
@Gabriel G. What neighborhoods are you buying in? How are you funding your projects?
@Eric H. In full disclosure, I am really new to REI. I have a triplex in Charles Village which I financed using a VA loan and I am closing on my first flip deal this Friday. Also in full disclosure, technically it isn't my deal. See what had happened was that it was a HUD property and as an agent I can't bid on HUD properties if my broker also lists properties for HUD (They think we have some sort of hidden advantage). With that said, I saw it was a great deal and showed it to a friend/partner of mine. She liked it so I put in a bid for her (which is totally legal since I am not buying it for myself). We also discussed that I would manage the rehab and then list the property for her. So even though I technically didn't buy it myself, I am still counting it as a deal under my belt lol. As far as funding, she had all the cash for the house and the rehab herself so no need for financing. However, when I get my first deal I will probably be using a hard money lender. Hope that helped and if you have any other questions, let me know!
Thank you all for your advises! :)
@Account Closed @Eric I have about 15-18K saved up and I plan to get a loan to help support my REI plan and if need I have family who can be potential hard lender as well. My goal is to start REI and learn as I grow in the business. Currently I am working full time job and going to school which make it little tricky to balance off but I am sure I can handle it. Once I have a good portfolio I can quit my job and focus more on REI.
Any other advice or strategy on starting up would be greatly appreciated.
The key isn't just that its a 30k home - its what other important factors are specific to the property to make it a decent deal or not. The best way is to educate yourself on what the right metrics are to approach these properties logically and with a system that works each time. So, its about the system to approaching these neighborhoods to maximize the return that is the most important.
Please do not listen to individuals who tell you that purchasing a 30K property in bmore would be a problem. My property is located in the Bel-air Edison area EAST Bmore, 10minutes from morgan state university
I purchased a property for 29.5, put about 4K into the property. PASSES SECTION 8, Use & Occupancy, Rental Registered and renting for $1200, I will refinance out of it and get a conventional loan. You can't ALWAYS listen to what other people think, what works for one will not always work for others.
BTW, I PASS Section 8 as well as Use & Occupancy inspection on my 1st inspections...
Thank you all for adding valuable information for my first jump. I could manage to get 50K but that would drain me a lot and any mistakes or bad luck would put me in hard spot to recover. I really do want to start REI sooner than later but I also understand the risk that I have to take with it.
@Lisa Phillips I been following your video and website... Love what you are doing and I hope we could talk some more about your projects.
@JEstate Investing It seem that you are doing exactly what I am trying to do. I would greatly appreciate it if we could talk more about it. As you know this is my first move and I really cant approve to make huge mistakes.
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