House hack analysis (Duplex, Baltimore city)

26 Replies

A very much already renovated duplex, brand new everything -- electrical, HVAC, furnace,carpets paint, cabinets. Both sides are currently unrented, the owner boutgh in 2017 for $230k, renovated most of it (still some small cosmetic stuff in smaller unit and outside), and then decided he didn't want to deal with it anymore. He's asking $249k. We found out house can be considered SFH from a lending stand point due to some loophole they used to get the house appraised (there were no comps for multifamilies for that street), which knocks off a quarter of a percent on our mortgage.

Unit #1 is 2 bed 1 bath and comprises the 2nd floor. Unit 2 is much larger -- officially 2 beds 1 bath with a large finished basement that could be used as an additional bedroom. Using rentometer we figure we can get $1400 for the larger unit and $1200 -- those are median prices for the area. Our monthly payments with 5% down would be about 1550. It's in Baltimore City; the elementary school zoned for this home is not good at all, but middle and highschool are decent. The neighborhood is an odd mix of blue collar and really really nice homes, it's kind of on a street by street basis. Comp wise compared to current SFH on the market its about average, compared to sold ones it's a little on the high side.

My analysis (assumes 3% for repairs and maintenence since all the big stuff is brand new; 3% for my management fee; 5% reserves and 5% miscellaneous; insurance and water and sewer (electric is billed separately)):

Worst (rent 25th percentile)Most Likely (median rent)Best (rent 75th percentile)
Income$26,520.00$31,200.00$35,532.00
Mortgage/taxes$18,504.00$18,504.00$18,504.00
Expenses$6,717.00$6,717.00$6,717.00
Vacancy (5%)$1,326.00$1,560.00$1,776.60
Profit/loss-$27.00$4,419.00$8,534.40
Total cash to close$20,561.00$20,561.00$20,561.00
CoC-0.13%21.49%41.51%

Amenities: Backyard, deck, and garage. Deck is the only thing in the entire house that needs to be renovated, but it's just scraping off the old paint and repainting/staining. Each unit has own sets of washers and dryers.

Pros: Minutes to a major university and large hospital. On a street with a lot of nice, well kept homes. Not a whole lot of work left to be done. Easy access to major highway. Seller is motivated because house has been on market for 30+ days and he is losing money; he's going to pull off market and rent himself if he doesn't sell in next couple weeks.

Cons: I'm struggling to figure out who my target demographics should be for renting the larger 3 bedroom unit, mainly cause the elementary school isn't that great. College students? Very young (not school age children) family? Urban professionals? Also according to IRR Viewpoint report, Baltimore is in the midst of a "hypersupply" in the market cycle, so housing prices will most likely drop.

Thoughts? Any insight appreciated?


The part of this post that would have me concerned is where you said "officially" unit 2 is a 2/1. I assume this means it now has more beds/baths. If that is the case and it wasn't permitted, is that going to come back and bite you in the butt? Better check on that before you sink your $$$ into it. Also a "mostly done" renovation is much different than a "completed renovation" so make sure you have a pro (if you're not) look it over and see what it may need and what quality of work was done.

Hi John, thank you for the reply! I think that was just bad language on my part: the second unit is two bedroom but there is a large finished basement that could be used as a bedroom if the tenants so desire. Does that make sense?


I will definitely make sure to ask our real estate agent about the permits and make sure we have the inspector take extra care with looking at the renovated parts of the house.

There are egress requirements for spaces to be used as bedrooms so if you acquire this property, make sure the basement space complies before you allow tenants to use it as bedroom space. (windows have to have a certain opening dimension and so forth)

@Ken Swearengen Your expenses are way off. You are at 25% expenses at the median scenario. I use 23% for vacancy,repairs and capex. Then add utilities,insurance and taxes on top. Let's assume your units are 1200 sf. 2400 sf of flooring. My area it is $6 sf to replace. 2400 sf * $6 = $14400/8 year life span/12 months in a year=$150 per month for capex for 1 item or 5%. That means for other items in a capex budget you will have to pull it out of pocket. Roof 25 year life span, appliances and hot water heater 12 year life span, hvac 20 year life span, and other I could name. Rerun your numbers and you will be surprised that even your best projection will cash flow much. 

@Tim Herman Thank you. Do you have a calculator or spreadsheet you use? Here are my numbers using your 23% expense rule, but I didn't break down the individual capex amounts.

Worst (rent 25th percentile)Most Likely (median rent)Best (rent 75th percentile)
Income$26,520.00$31,200.00$35,532.00
Vacancy/repairs/capex$6,099.60$7,176.00$8,172.36
utilities$1,400 $1,400 $1,400
mortgage/taxes$18,504.00$18,504.00$18,504.00
insurance$1,044 $1,044 $1,044
profit/loss-$527.60$3,076.00$6,411.64
Total cash to close$20,561.00$20,561.00$20,561.00
CoC-2.57%14.96%31.18%

@Ken Swearengen If you become a pro member you can use the various calculators for free. There is a spreadsheet in the files section that is similar to BP calculator. Your utilities look really low. It is less than $60 per unit per month. I pay that in water per month. 

I would also ask the current owner if this property you are looking at is actually registered with the city as a duplex.  If you are going to do things right, you'll have rental inspections to complete with the city and inspectors will want to verify the U&O (use and occupancy) paperwork.   

Just a small plug for the BP calculators.. These bad boys are amazing.  Dare I say worth the price of a Pro membership alone?  

@Tim Herman I bumped it up a little just for cushion, but the utilities are just water and sewer. The electric is seperately metered, so I'd bill those back to the tenant.

@Solomon Morris Baltimore city has a website were you can see if the property is registered and licensed, this property is neither. Our agent informed us of the process though. 

Unless the water meter is separate for each unit it gets paid by the landlord. What about landscaping/snow removal? Fixed expenses (tax, mortgage, ins, PM, lawn/snow), Capex (Vacancy, repairs, water/sewer, roof/boiler/plumb/elec). Add up all of the deductions and its about 45% to be deducted. To be safe id take away 50% for expenses especially in the beginning so you have a better cash cushion. Yep, knock off half of your monthly rent collections for costs. You can slim it down a bit if your Capex are relatively new.

@Ken Swearengen This duplex looks a lot like one of our properties here in Baltimore City. 

Your initial analysis seems reasonable, for the most part. Now, I am not sure where in the city the property is, so it will be a little tricky to give a holistic recommendation. 

To answer your concerns:

Target demographics: There a lot of healthcare professionals and also young professionals who work in the city and like city life because they don't have kids yet, so you won't need to worry about the schools. Most of our tenants in Baltimore City are either "DINC" ("double income, no kids") or young professionals working in the City. 

Markey cycle: Yes, you don't want to concern yourself too much with the market dynamics since you aren't trying to build a high rise in the city. 

One thing I could tell for free is if the zip is 21231, then buy right away. 

Good luck. 

Originally posted by @Ken Swearengen :

@Ola Dantis Thanks for the insight! It's 21234 -- Parkville area. We've lived in the county for the past 5 years so want to stay relatively close to it. 

 That is still a decent area. 

Good luck on the deal. 

@Solomon Morris @Ola Dantis @Tim Herman @John Teachout @Anthony Rosa Thank you all for the help! We actually secured a verbal offer last night for $10k below the listing price which we were excited about. But as I was filling out the offer contract this morning it informed me that I should look over the sex offender registry, and it wasn't looking good for that particular area. Wouldn't bother me if it was strictly an investment property, but we would be living in half the duplex with my 3 year old and 9 month old so it turned out to be a deal killer. 

It's been a good learning experience though, you all gave me valuable advice about expenses -- I'll keep on trucking along!

Sex offender registries are helpful but I don't think I would make a purchase decision based on one. Have you checked for the area you live in now? There's LOTS of registered sex offenders and they all live somewhere. Most places are going to have offenders in the vicinity.

@Ken Swearengen  you wrote
Baltimore city has a website were you can see if the property is
registered and licensed, this property is neither. Our agent informed us
of the process though

Can you please send that link, That is a site i am not familiar with. 

@Ned Carey @Ola Dantis @Solomon Morris Two questions for you guys:

1) Do you have any neighborhoods in the region where you guys are seeing a lot of 2-4 unit homes coming on the market? Or any neighborhoods that are getting money pumped into them?

2) I'd like to start expanding my search to include homes that need more work than normal (probably using an FHA 203k). Do you have any contractor recommendations, ideally ones who work with 203k loans?

I'd appreciate any info you guys could pass my way!

@Ken Swearengen 2-4 unit properties are very in demand right now. I don't think you are going to find a lot of those properties in any area.  What is available tends to be in bad areas or overpriced or both.

I don't know what you mean by "Money being pumped into them." However just because the government is pushing an area or putting in money doesn't mean it is a good area to invest.

lol. This was my listing.  Under contract now.

Funny enough though I did tell your agent, if sex offenders are an issue, the location of where multifamily properties are located simply wont work for you.  There is really nothing you can do about that.  Could have had a good deal though

Originally posted by @Ken Swearengen :

@Ned Carey @Ola Dantis @Solomon Morris Two questions for you guys:

1) Do you have any neighborhoods in the region where you guys are seeing a lot of 2-4 unit homes coming on the market? Or any neighborhoods that are getting money pumped into them?

2) I'd like to start expanding my search to include homes that need more work than normal (probably using an FHA 203k). Do you have any contractor recommendations, ideally ones who work with 203k loans?

I'd appreciate any info you guys could pass my way!

 Personally, I like Fells and Canton in general; however, you will need the patience to get deals. So, look out in zips: 21231 and 21224 and surrounding area but YOU MUST visit an area or view the property yourself to gauge the block very well. Also, in Remington and Bolton Hill areas have gems. 

Contractor recommendations, I can refer a couple via PM.  

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