So, maybe I know enough to think I'm right, but not enough to realize I'm wrong. In all fairness I have listened to every episode of the podcast, many of them multiple times (even the boring ones). You pair that with my PhD in bro science, and I know just enough to be dangerous. My name is Eddie. I live in East Manassas Park, VA. I purchased my primary residence with the intention of house hopping and renting it out, before i discovered BP. To the point: Basically, I make a pretty good W2 income, and get paid to listen to BP all day. I plan on moving forward with my house hopping strategy. However, I live in NOVA DMV. There isn't anywhere for me to move. I digress and I'm long winded. Back to the point: Coworker lives in Baltimore (union Square), has a house warming. I realize he paid like 60K less and got way more (previous owner way overspent, wolf stove, spiral staircase the whole nine). My jealousy and envy compel me to start scouting the area. I like the Union Square Hollins Market area. I spot a doll house, view it, think about airbnb... I could make it work, but I'd be making it work. At the same time , not only does the 90 day challenge put a battery in my back, but a mentor falls out of the sky. I zero in on a REO right around the corner from my friend. I know what he paid for his. I know his income. I know hes bought in for at least the next 5 years. The demographics are working in my favor. The place doesn't look that bad. The bank wanted 44,900. I initially offered 39,500, they countered at 43K, I countered at 41K, they accepted. I wanted to offer less, but I let the realtor talk me out of it. The listing says pending, but they haven't sent back the signed contract. Hopefully, they will tomorrow. I'm estimating 20K in repairs, ARV of 75K, $1250 rent, $162 monthly [email protected] 5.38% over 30 years (called like 50 banks to no avail, decided to call the bank i keep my money in and found out they hold their own paper). Currently it's assessed @ 157K, 60K in the land alone. I'm looking at it like between it being a REO and appealing the tax assessment. I can force equity/cashflow without actually doing too much. I'm looking at it as a long term rental. Still waiting on the contract, but I have Michael D. Pachino tentatively scheduled for the inspection. I have financing and inspection contingencies. What am i missing? Please feel free to rain on my parade. Any and all input is welcomed. I close 12/27/17. Help!
@Edward Howell, V if the repair numbers you say are correct that is a respectable deal based on the cash flow and rent to price ratio. I like the area however baltimore is block by block. One block may be good and just a block away values can be much lower. The properties that actually face union square tend to be pretty nice but only a block and a half away and you can be in a poor area.
Union square was were I came up with Ned's Park theory. You can be in the middle of the hood but the properties that face a park are good.
Your rent number is probably good for a nice property. Your ARV would depend on how nice and which block. It could be much higher or lower.
An issue you may run into is getting financing. An investor property is harder to finance. The fact that it needs repairs means that a traditional loan may not work. You may need a construction loan or need "Hard Money". Hard money are high interest loans base on the Hard Asset more than your personal credit. However these are temporary loans (1 year or less) and you will have to refinance after renovations. You may find it hard to refinance for more than you paid, to cover repair costs, unless you have it up and running as a rental for 6 months to a year.
I think you'll be fine. My only question is about the distance. As I was first reading I thought you were considering moving to Baltimore. Many people work in DC and live in Baltimore because, as you said, you can get more for your money.
How are you going to manage it? Yourself or a property manager? Distance always makes things a pain for me, so that was the first thing that stood out to my little mind. Also, I'm not sure how you secured the contract without proving that you had financing ahead of time.
But congrats on what should be your first rental (and rehab), right? You'll learn a ton from the first one.
Thanks for your response. I was told to think of it like a pizza. Union Square is the cheese. I’m buying in the crust, but I think I might be where the sauce meets the cheese. The house two doors down is for sale and they just dropped the price to 80K. I doubt they’ll get that. I think my unit is in overall better shape. The listing says Pratt-Monroe, but it’s technically in Union Square historic district for chap purposes.
I think I might run into issues with financing. I’m pre qualified @70K based on income and OT, but I don’t think I have formal preapproval. My lender says the property needs to be move in ready, but I’m rolling the dice. I’m currently looking into homestyle loans. I think this is what replaced homepath loans?
Thanks for your response. I have budgeted for property management and have been reading the treads. I sent a prequalification letter. Maybe that's why the bank is taking so long to sign the contract, because I don't have a formal preapproval? I'm not sure it's really a done deal yet. They asked for a picture of my EMD, but I'm not mailing the check until they sign the contract. Fingers crossed!
@Edward Howell, V What do these repairs include if you don't mind me asking?
@Joseph Abad I’m hoping mainly cosmetic. The windows look good. I don’t know about the roof. It needs new carpet in the living room. The stairs need to be sanded and refinished. Some new appliances and paint. No A/C. I still have the home inspection and the sum total of my estimating knowledge is bro science and I’m reading J. Scott’s book on estimating rehab cost.
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