4/1 SFH in western maryland

7 Replies

Hi BP,

New investor here seeking advice from the more experienced. I finished my first flip last year...and just sold it a week ago and broke even, so I'm really hesitant to make another leap of faith. I want to be sure of my numbers this time around.

Short of it is, I'm looking at a 4/1.5 SFH in an area that would get me a solid $800 a month. The property sat on the market for over 100 days at 45k and recently went up for auction. No activity so far, so I'm guessing I could get it for 25k. Considering the property is in immaculate shape and only needs some drywall touch up and paint, I can't help but think this property is a steal.

So before I get to expenses, I have to wonder: is there something wrong with this property? Are there hidden issues I may not have seen? The only issues I can come up with are that it's in a mediocre school district, has an ugly exterior, has an oil heater, and was built in 1900. No lead paint or asbestos anywhere though. 

As far as expenses go, this is what I'm thinking, please correct me if Im wrong:

taxes: 67

insurance: 67

property management: 72 (9%)

utilities (water and trash): 85

vacancies: 96 (12%)

capex/repairs: 90 (@.67/sq ft - I've seen this figure elsewhere on BP, can anyone comment?)

TOTAL EXPENSES: 470

TOTAL PROFIT BEFORE MORTGAGE: 800-470 = 330 month*12 = 3960/year.

If I paid 25k upfront I would have a return of around 15.8%. All this sounds too good for a SFH. What else should I be asking? Do my figures look too generous?

Michael, have you spoken with your agent to have them look into any disclosures made on the property? Without knowing the exact area (which I can't blame you for sharing LOL) I can't tell you if that's truly a steal but on paper it sounds like a great property. I live in Baltimore, but very familiar with MD pricing and that doesnt really sound out of line on any of these items. Also, check major items like roof and foundation because if anything is wrong with those then turn and run! That will eat your profit for a couple of years.

The numbers sound good. Deals like that are not hard to find where I am - baltimore. So this may not be a case of "too good to be true" It could be a legitimate deal. 

I would caution you however something built in 1900 could easily have old wiring or plumbing behind the walls. I would write a contract with an inspection clause and have a good home inspector check it out for me.

Your numbers look good and accurate. Since it's an auction, will they let you do a home inspection?  If not, get a good structural guy in there to look at the foundation, attic, wiring and plumbing before you finalize your bid.

Holding it as a rental is very different strategy than flipping.  The home may not sell because it's ugly but that doesn't mean it wont rent.  But, you've got to be prepared to be in for the long term when you buy an ugly rental and the western MD real estate market is probably not going to go on a tear any time soon.

Good luck.

Didn't win the auction. Ah well. I was able to walk through the house and inspect most everything, I'm no general contractor but I did flip a house before using my own labor so I know some of what to look for...didnt bring a lead paint test kit but probably should have. I could have bid higher but I didnt have the financing lined up in time. Finding hard money lenders/finance sources has proven to be a little more tricky than I thought (not that I started looking yesterday, of course.)