Baltimore City- construction loan if next to a vacant

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Baltimore City- construction loan if next to a vacant

Dennis Bates
Rental Property Investor · Washington, DC · Member since 2013 · 5 posts · 5 votes

Hello All- I'm an investor in Baltimore, MD, and I am in the process of buying a row home from a Baltimore City auction. Once rehabbed it should have an ARV of over $200K, which will provide a nice profit if I decide to sell. However, the property is in an up and coming neighborhood (several recent good sales right around the corner from the property), but has a vacant row home next door. The lender I wanted to use for this project has stated that they won't provide a construction loan since there are vacants on the same block. Is anyone aware of any lenders in the area that might provide a construction loan for a project like this, even if it has a vacant next door? I plan to buy the property using my own cash. I think I could complete the rehab using my own cash as well, but I'd have to wait a while to start the project if I go that route.

Thank you,

Dennis Bates

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Joe Norman
Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
4y

Run away, this is not a deal.

First of all, I promise that if its in an "up and coming" area with multiple vacant houses on the block, including next door, then the ARV is not $200k. There may be "several recent good sales right around the corner", but that doesn't mean they are good comps for this house or this block.

Second, if a local HML won't fund the loan, trust his expertise that this is not a house worth investing in.

Don't be one of the dozens of DC investors who loose their shirt in Baltimore every year because they think every cheap property is a deal. If you PM me the address I'd be happy to give more property specific feedback.

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  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Run away, this is not a deal.

    First of all, I promise that if its in an "up and coming" area with multiple vacant houses on the block, including next door, then the ARV is not $200k. There may be "several recent good sales right around the corner", but that doesn't mean they are good comps for this house or this block.

    Second, if a local HML won't fund the loan, trust his expertise that this is not a house worth investing in.

    Don't be one of the dozens of DC investors who loose their shirt in Baltimore every year because they think every cheap property is a deal. If you PM me the address I'd be happy to give more property specific feedback.

    3Reply
  • Amanda Mark
    Insurance Agent · Cleveland, OH · Member since 2017 · 23 posts · 16 votes
    4y

    What neighborhood is it?

    0Reply
  • Seth Hochberg
    Member since 2020 · 120 posts · 135 votes
    4y

    I agree with @Joe Norman - I have yet to see any property with an ARV of 200k that has vacants on the block. The one exception is if you are buying the very last vacant on that block, then that's usually a good deal. But having a vacant next door is not great - you can't even rent the house using section 8 (I'm 95% sure of that - someone may need to fact check me there).

    Also, I don't feel many neighborhoods are up and coming in Baltimore. In DC, there's been a lot of change in the last 20 years (even the last 5) so if you pick the right neighborhood, you might get lucky and and catch the wave as home values are increasing. DC is a huge appreciation play. As an investor in Baltimore I assume I will get 0% appreciation - because the appreciation you do get will usually be nominal. So I'd be wary of the "Up-and-coming" neighborhood idea as I believe the neighborhood already "came" or it will not.

    Just my $0.02

    1Reply
  • Dennis Bates
    OP
    Rental Property Investor · Washington, DC · Member since 2013 · 5 posts · 5 votes
    4y

    Thanks for the responses- the row home is located in East Baltimore/Midway. The lender that I initially wanted to go with was a non-profit community lender that would have provided funds at below HML loan interest rates. They have rules against vacants, and also have a minimun loan size that is above what I'd need here. From some further information that I've gathered, it sounds like some local traditional hard money lenders may be able to provide funds for this project.

    And yes, I agree with the need to be cautious with deals like this, the neighborhood is definitely not "up and coming" in the DC sense, but I'm hoping it will see some more revitalization activity in the future, similar to the Pen Lucy/Waverly area right now. I'll see what happens- wish me luck☺.


    Best,

    Dennis

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    4y

    @Dennis Bates try reaching out to @Marc M. at Trius Lending.

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    2Reply
  • Amanda Mark
    Insurance Agent · Cleveland, OH · Member since 2017 · 23 posts · 16 votes
    4y
    Originally posted by @Dennis Bates:

    Thanks for the responses- the row home is located in East Baltimore/Midway. The lender that I initially wanted to go with was a non-profit community lender that would have provided funds at below HML loan interest rates. They have rules against vacants, and also have a minimun loan size that is above what I'd need here. From some further information that I've gathered, it sounds like some local traditional hard money lenders may be able to provide funds for this project.

    And yes, I agree with the need to be cautious with deals like this, the neighborhood is definitely not "up and coming" in the DC sense, but I'm hoping it will see some more revitalization activity in the future, similar to the Pen Lucy/Waverly area right now. I'll see what happens- wish me luck☺.


    Best,

    Dennis

    They are fixing up houses around there close to Greenmount. If it's the nonprofit I think you're talking about I believe they want a $200k ARV and they are not a fan of vacants. Try Spring Garden Lending and Temple View. I know someone that used Spring Garden in that neighborhood. However I don't know street you are on. I'm not a big fan of flipping over there but some people have done it.

    1Reply
  • Marc M.
    Contractor · Rockville, MD · Member since 2014 · 423 posts · 135 votes
    4y
    Originally posted by @Russell Brazil:

    @Dennis Bates try reaching out to @Marc M. at Trius Lending.

    Thanks, Russell!

    Dennis, I'll send you a PM with my info. If the numbers work we can almost definitely help you with this.

    0Reply
  • Michael Schleicher
    Real Estate Agent · Baltimore, MD · Member since 2018 · 37 posts · 16 votes
    4y

    A few thoughts from previous comments:

    - Be mindful that walking away from an auction sale isn't like a traditional real estate transaction. You likely signed a contract absent any contingency, and walking away from the transaction will result in the forfeiture of your deposit.

    - Without specifics, making a blanket statement that you will lose money is just as ill-advised as saying you will hit a home run on the same property. Be wary, but don't make irrational decisions on a whim.

    - With auctions, due diligence should be done before bidding, but don't stop after you win the bid. Watch your timeline. Always have an exit strategy and know the cost of executing.

    - As you continue the process of attempting to secure financing, work to learn from others that have successfully invested in the area. Make connections to grow your network and list of partners.

    Best of luck!

      0Reply
    • Ozzy SirimsiBusiness Member
      Real Estate Agent · Baltimore, MD · Member since 2016 · 1k+ posts · 782 votes
      4y
      Originally posted by @Joe Norman:

      Run away, this is not a deal.

      First of all, I promise that if its in an "up and coming" area with multiple vacant houses on the block, including next door, then the ARV is not $200k. There may be "several recent good sales right around the corner", but that doesn't mean they are good comps for this house or this block.

      Second, if a local HML won't fund the loan, trust his expertise that this is not a house worth investing in.

      Don't be one of the dozens of DC investors who loose their shirt in Baltimore every year because they think every cheap property is a deal. If you PM me the address I'd be happy to give more property specific feedback.

      Exactly what I would say :D)) 

      Good Call!!!

      1Reply
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