Ask opinion for a rowhouse in 21239, Baltimore city (rental)

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Ask opinion for a rowhouse in 21239, Baltimore city (rental)

Ken Wang
Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes

Dear Investors, 

  Here is the deal I am seeking the opinion.  

Row House in zip code '21239' in Idlewood community, Baltimore : 3 bed/1.5 bath

Trulia data: low crime rate

Age: 1953

Asking price ~ $120k

Proposed offer price: $90k

Roof & gutter: 2010

HVAC > 20 yrs

Hot water heater: recent

Plumbing: copper 

Closing cost: 7k

Repairs and MISC costs: $5k (Paint, lead certificate, patio fix, rental registration, cleaning, and unexpected cost)

Down payment: 20% (30 yrs, investment loan)

Loan rate: 5% 

Rent total: $1400 (below rentometer average, and I have checked recent listing as well) 

P&I: $387/mo

Taxes: $198/mo

Insurance: $50/mo

Lawn care: $40/mo

Ground rent: $8/mo

Vacancy: 8.3%  (1 month vacancy/yr)

CapEx: 18% (for this > 50 yrs old house)

Property Management: 10%

Cash flow: $210/mo

total cash need: 30k

Cash on cash: 8.4%

I have a few specific questions and would like to learn from you guys;

1. I have done my homework but would like to ask if I am being too conservative. 

2. Related to the 1st question, I have been searching rental property for a while in Baltimore city and close to west side of Baltimore County.  It seems difficult to see > 8% cash on cash return after considering all the expense, neighborhood, property condition and potential tenant category. After all, for this property, I can only get $210 monthly cashflow. I am wondering am I not looking hard enough or it is normal for Baltimore or surrounding market these days? I am not looking for low-value property but in a reasonable neighborhood to get a steady income. 

Any comment/critique is welcomed! Appreciate your time to read this list.

Sincerely,

Ken 

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Eric H.
Real Estate Solutions Provider · Baltimore, MD · Member since 2014 · 571 posts · 452 votes
8y

@Ken Wang Greetings,

I don't think you're being too conservative. The caveat is I am very conservative when it comes to  running my numbers. I use 12% vacancy factor for example. I think you will be able to place a more stable/attractive tenant in that neighborhood though.

If you are looking for a greater cash on cash return, consider the BRRRR strategy. Find a value add property, renovate, rent it out, refinance, and then repeat. This strategy will provide you with a greater coc return because at the time of the refinance you can pull all or some of your money out. Furthermore, you will be able to decrease capex designation by improving all major systems/structures when doing the renovation.

Happy investing! Peace!

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  • Eric H.
    Real Estate Solutions Provider · Baltimore, MD · Member since 2014 · 571 posts · 452 votes
    8y

    @Ken Wang Greetings,

    I don't think you're being too conservative. The caveat is I am very conservative when it comes to  running my numbers. I use 12% vacancy factor for example. I think you will be able to place a more stable/attractive tenant in that neighborhood though.

    If you are looking for a greater cash on cash return, consider the BRRRR strategy. Find a value add property, renovate, rent it out, refinance, and then repeat. This strategy will provide you with a greater coc return because at the time of the refinance you can pull all or some of your money out. Furthermore, you will be able to decrease capex designation by improving all major systems/structures when doing the renovation.

    Happy investing! Peace!

    3Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y

    @Eric H. appreciate your opinion. Yes, BRRRR is one strategy I am interested in. I am still new to the rehab process so don't have enough knowledge yet to estimate the rehab cost as well as understanding the whole process. If there is a good opportunity to learn or partner with someone, will be happy to :)

    0Reply
  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    8y

    Hi @Ken Wang

    I think your numbers are almost fine with couple exceptions.

    It seems like you are planning  to clean the house and rent it which is fine. 

    I recommend doing some updates in the house that  will not only increase your chance to get $1500, you will also get long term tenants with very good income which will lower your vacancy numbers.

    When you rent around Idlewood you will get some voucher holders and  really solid applicants.

    If you are looking into voucher tenants your plans are fine, if you want longer term tenants and get decent pay and steady rent, I bet you need to update the kitchen and may be a bathroom which will require at least 15K.

    We do some updates right around Belvedere Square , let me know if you want me to look at it.

    Good Luck

    2Reply
  • Stephanie P.Pro Member
    Washington, DC Mortgage Lender/Broker · Member since 2016 · 4k+ posts · 2k+ votes
    8y

    @Ken Wang

    Ken,

    That same neighborhood you're looking in has some wonderful properties that have legal 2 units.  Look into them.  We used to own a property on Chinquapin Pkwy that was really nice and large.  I think you could get one of those for close to the same money with almost double the rent.

    Stephanie

    1Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y

    @Stephanie Potter

    Thanks, that's very useful tip, definitely will look into it!

    Ken

    0Reply
  • Tim Youse
    Rental Property Investor · Baltimore, MD · Member since 2016 · 153 posts · 158 votes
    8y
    Originally posted by @Ozzy Sirimsi:

    ... I bet you need to update the kitchen and may be a bathroom which will require at least 15K.

    We do some updates right around Belvedere Square , let me know if you want me to look at it.

     Hey Ozzy - what updates do you recommend? Any pics? 

    0Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y
    @Ozzy Sirimsi

    Thank you for your suggestion. Will keep the tip in mind. If I get the property, will update you.

    In addition @Ozzy Sirimsi and @Eric H., it occurred to me that when people budget the PM cost, like I showed my post, people normally don't budget the 1st month rent for tenant placement. It will further kill the profit. For example, the rent is $1400 if I lose 1 month rent, it will easily kill my $210 profit/month. I wonder how you guys budget this cost? thanks!  

    0Reply
  • Ozzy SirimsiBusiness Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
    8y
    Originally posted by @Tim Youse:
    Originally posted by @Ozzy Sirimsi:

    ... I bet you need to update the kitchen and may be a bathroom which will require at least 15K.

    We do some updates right around Belvedere Square , let me know if you want me to look at it.

     Hey Ozzy - what updates do you recommend? Any pics? 

     I almost always update the kitchen, meaning changing the cabinets, floor, if possible open up  a wall, if not open a breakfast bar window. It not that cheap  but I like to have longer term tenants, so I like to spend little bit money.

    Last house I rented, somebody said that my house was the by far the best house and it was priced same, I got 38 interest, didn't accept voucher and rented in a 10 days.

    Renter's income was 5 times higher than the rent.

    2Reply
  • Evan Roberts
    Contractor/Realtor/Property Manager · Baltimore, MD · Member since 2015 · 73 posts · 42 votes
    8y

    Yeah I have to echo Ozzy's perspective. Your projections for money spent renovating are very low and will likely yeild a mediocre product which has the snowball effect of getting a mediocre tenant and so begins the downfall of many investors. We always do essentially a full renovation so that we're not inheriting unknown deferred maintenance and also can create a home that someone wants to take care of long term. It also allows us to push ARV on our refinance appraisals, which has been very beneficial for eliminating the need the leave in tremendous amounts of cash in a property (sometimes can get out with leaving no cash in depending on terms available to you).

    1Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y

    @Ozzy Sirimsi and @Evan Roberts thanks for the suggestion. The property was well maintained by the 1st owner, although the style is a bit updated but in OK condition with a few updates. The $5000 is mainly for cosmetic fix, but will keep your advice in mind. These are good suggestions, Sincerely, Ken :) 

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    I think you can find a better deal in Baltimore - Look at expired listings - make offers of 20-30% below the last listed price.  Follow up on tax sales that have not been foreclosed - some fat equities there also.

    Attend some of my real estate auctions - some good deals there.

    Make many offers - sight-unseen subject to inspection - do this right and it will accelerate your success in this crazy business.

    2Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y

    @Account Closed , like your response, could you share the link for your real estate auctions? thx! Ken 

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    Auctionbrokers.net

     You might like or program one auctions, control and roll system, at Investorsunited.com

    You can call me anytime. 

    0Reply
  • Ken Wang
    OP
    Rental Property Investor · Laurel, MD · Member since 2017 · 176 posts · 37 votes
    8y

    Thank you @Account Closed I book marked the website ! Enjoy the rest of long weekend :)

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    Ken, thanks for the note. We have the MDREIA first Tuesday of Feb.. You may want to come to the meeting.

    Send me your email and I will add it to our auction mailings.

    Call anytime if you need Intel on Baltimore.  

    Charlie

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y
    Originally posted by @Ken Wang:

    @Account Closed , like your response, could you share the link for your real estate auctions? thx! Ken 

     AuctionBrokersdotnet

    glad to help you, call anytime.

    Charles

    0Reply
  • Account Closed
    Reisterstown, MD · Member since 2016 · 1 post · 0 votes
    8y

    @Account Closed Just checked out your site and bookmarked it.  I have a small request concerning the site that is off topic from the main topic of this thread, may I connect and PM?

    0Reply
  • Account Closed
    Professional Auctioneer · Baltimore, MD · Member since 2015 · 1k+ posts · 1k+ votes
    8y

    yes ---- please do --- glad to help you -

    0Reply
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