Newbie Looking To Purchase a Multi Family in Baltimore City

7 Replies

Good Evening,

My name's Michael and I'm from Riviera Beach, Maryland. I'll be honest, I'm as new to REI as one can be. I feel like I started off trying to learn every strategy for every niche there is in the real estate field. A jack of all trades but a master of none. Jumping between strategies and niches daily and sometimes by the hour. In doing so, I realized that I really needed to focus on a set niche and a set strategy and just master it to the best of my ability. But the most important thing I had to do, is take action. I would never get anywhere and progress if I continued to be so scatter brained.

So I've decided I would like to start my REI career in Multi Family rentals. Building a portfolio of rental properties that are generating some cashflow is my goal at the moment. I'm quite determined to make a business of it. I've been looking through multiple markets throughout Maryland and have been pre approved for up to $250k. I've seen some properties in this range that have remarkable numbers to me.

Which leads to some of my concerns. First of all, I'm new to the game. I bought my current residence over a decade ago and haven't dealt with any other real estate endeavor since. This would definitely be a huge step in my life so I am quite nervous about going through with everything. I saw a property yesterday that looked like a potential winner so I scheduled to see it. Unfortunately it was already under contract but during that hour of time waiting to hear back from a realtor, I was pre approved from a lender. The process just seems to be going so fast and is a bit worrisome to be quite honest. I'm quite sure its normal at this stage, at least I think it is. Doubts, fears and worry are constantly at play it appears. I guess its the unknown, not knowing what could happen. Could this be a bad decision? The battle is constant. What if this is one of the best decision I make? How does one help calm these fears? Does one ever really conquer them?

Next, some of the properties seem too good to be true. Even low balling the rent according to Rentometer brings in a remarkable cash flow and that's taking the mortgage, taxes, insurance, 5% vacancy, 5% repairs, 10% CapEx, 10% PM and even a miscellaneous $50 into consideration. Wouldn't more people be purchasing these investments if they are as good as they seem? Granted I've only seen a handful, but still, they "appear" to still be available. I've contacted a realtor in order to check them out. Then again, maybe they are also already under contract.

Are these %'s right for this area? I have the slightest idea, but that's what I went with for some reason. I understand they will most likely be based on whatever market I'm in.  I just wonder If there is a general rule of thumb on how to come up with them. Also being the city, are there any other fees, taxes or expenses I may have missed that I would need to take into consideration?  Maybe that is why my numbers are showing such great returns?

My next concern is the area.  I'm pretty certain most people in the US has heard of Baltimore City and their perception of it may not be the best... This may be hard to believe, but according to some things I've looked into, crime could be an issue.  Looking at the properties on Google Maps Street View, the areas look fairly nice.  But I guess looks can be deceiving. With my current employer, I've had the opportunity to work outside at all hours of the day and night, all through out the city in the past but couldn't say if I've been to these parts. I've contemplated taking a ride to some of these locations at different times to see if I could get a general feel for the area. Maybe that would help ease my next concern?

Vacancy rate.  I'm curious what sort of demand there really is for these parts of Baltimore.  I mean if the properties seem too good to be true, could that be because the chances of finding a renter could be slim?  If I make such a purchase and can't find tenants, what would I do? What could I do?  See what I mean about the fears and doubts? 

When I do get that first deal, I'd honestly prefer to hire a property management company to deal with tenants and all that jazz. Not really because I don't want to, but more so due to time constraints. My current employer requires a fairly large amount of my time. Like, a majority of it. Hence another reason for me wanting to start getting into REI. To maybe one day, be able to part ways with this company to allow someone else to benefit in my position the way I have.

There seems to be so much to learn and experience. I'm thinking I really wrote this post to get out some of the things going through my head lately. Maybe have some experienced investors offer some insight to the process. Suggestions? Support? Criticism? Am I moving to fast? Not fast enough? Is this normal? There are so many other questions firing through my brain that I have about the process but I can save them for another day. This was way more than I was expecting to write, but I feel quite a bit better now. I'll just have to finish my novel some other time. I appreciate any advice and thank you all for your time and what you do.

-Michael


@Michael Stults

like you i initially found plenty of rowhomes beating the 2% rule for cheap that looked great from my computer. After writing the addresses down and driving to go see for myself, I realized why these properties were sitting on the market so long for a cheap price.

a lot of your concerns would be eased by actually driving to baltimore yourself and at most a 20min phone call with a property manager. Street-view is a great tool but a lot of what you see can be years old and not depict the real disposition of the home/neighborhood. if Riviera beach is your actual location, you literally live 25mins away from the city. Is your hard earned money not worth the drive?

Go find some neighborhoods you'd feel comfortable investing in then a connect with a reputable property manager to discuss your other concerns (vacancy etc.).  There is money to be made in Baltimore, I can promise you that.

@Michael Stults You are not alone feeling doubt or concern about investing for the first time. Most, if not all, new investors will have a hard time pulling the trigger on their first deal.

I would recommend talking to a local Realtor as well as Baltimore investors. Get to know the areas of Baltimore City intimately. A good Realtor will be able to tell you exactly where to invest in the city. They can often tell you the difference it can make buying properties just a block or two apart, and Baltimore City DOES change by the block.

If you know for sure you want to make the jump, start looking at properties with them. Fear is from not knowing. So get out there and learn. If you need a Realtor referral, feel free to message me.

@Solomon Morris -

To be quite honest, none of the multi families I've been looking into are row homes.  I have seen many of them in person in my time up there.  Nothing I would be interested in at the moment.  The properties I've been eyeing, are quite large single families that appear to have been converted to multis.  

That's a phenomenal idea and you're correct.  I'm literally a stones throw away from the location I'm looking to invest in.  Some day trips learning the areas sound like sound advice.  Thank you Solomon.  I really appreciate that.

@E Brady

That's great to know it's normal to feel this way. I think taking some trips to learn the locations should really help put my mind at ease.

I have recently registered to attend some REI get togethers hosted by MAREIA to start getting to know fellow investors. I plan to stay active on the forums to absorb as much as I can.

Thank you for the advice.  I appreciate it.

 

@Michael Stults the only way you can truly learn baltimore is if you tour the market. it is a very block by block city. For rent comps, I try to interpolate different data sources. For potential vacancies, I would stay away from under C areas as you will probably find yourself in the wrong part of town with high vacancy or economic vacancies. Still a great city for cashflow!

Originally posted by @Michael Stults :

@Solomon Morris -

To be quite honest, none of the multi families I've been looking into are row homes.  I have seen many of them in person in my time up there.  Nothing I would be interested in at the moment.  The properties I've been eyeing, are quite large single families that appear to have been converted to multis.  

Michael please just make sure the U&O (Use and Occupancy if i remember correctly) specifically dictates it can be utilized as a multifamily. 

Other baltimore investors please correct me if I'm wrong:

If you are planning to split or utilize a single family as something else (commercial, duplex, triplex etc) it must be registered and approved as such by the city before placing tenants.  Naturally, to circumvent the system, there are many landlords that are bypassing this process to save registration and other fees.  If tenants in those properties actually reported their situations, the property owner would face the consequences of not adhering to the law

 

@Yannik Cudjoe-Virgil -

I really appreciate the input.  It got me to look into and learn something I hadn't really thought of.  So I just finished up reading on ways to try and identify the different class areas.  Based off what I'm seeing, I think I have a general understanding of it now.  As you and others have mentioned, learning the areas I want to invest in will be part of my homework now.  Just comparing the area I currently live in with what surrounds me, I definitely can identify the different class areas.  Thanks!

@Solomon Morris -

That is a great thing to know!!  I would have never thought of that.  Makes sense though.  I could see people trying to fly under the radar to save a couple bucks.  I presume this would be something I could find out from the Maryland Department of Assessments and Taxations search site?  Thank you again.

I don't know where you are in your search, but good luck in Baltimore. If you find a house that you hesitate dont afraid to ask opinion, good amount of us can understand the area, can help you to make basic decision.

Good Luck

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