All Forum Posts by: Alan C.

I would agree with @James Williams, but it's a kind of Catch 22 situation. A newbie investor who doesn't have the education to estimate rehab costs shouldn't put a property under contract. If they don't know the costs, how can they know what to offer? 

The exception would be to make a best guess as to the repair costs and then have the contract specify a 7-10 day inspection clause. That way, should the repair costs be too high, you can get out of the contract. The downside is that if you walk away too often, no one will take your offers seriously. So it might be best to pay some contractors for their time to walk you through a house. Even if costs a few hundred dollars, it might be worth getting some real-world advice. 

And you can always buy some of the courses offered by local or national speakers on the circuit. Some of them contain videos with contractors going over how to estimate repairs. Plus, there are a number of apps that say you can plug in some facts about the house and get a good rehab estimate. I've never tried them and am skeptical, but there are some people who say they work well enough.

Congrats on getting all the work done and a deposit, too!

One point of clarification---Baltimore Gas and Electric (BGE) handles the gas and electric utilities so they install/remove those meters. The city handles the water via the Dept. of Public Works.

I just saw the property address. I can tell you that 21223 is a very cheap and dangerous zip code except for two areas: Union Square and Hollins Market. I know one investor who only works that zip code and does well financially, but he has a lot of trouble with the type of tenants you tend to get who are willing to live in those neighborhoods. So he has a a great ROI, but pays for it in added stress.

My congratulations to Sebastian on controlling an entire block in Baltimore! I am owner and president of an investor association in the Baltimore area since 2002. It seems that almost all new investors with any ambition want to buy a block in Baltimore, either by themselves or in coordination with some other investors. The problem is the logistics since you first have to find a block where that strategy might make sense. And then you have to actually buy/control all the properties. Even if you are very lucky, there's sure to be at least one owner who figures out what is going on and then holds out for a price that is unrealistic. Or you come up against a property where the unpaid taxes, water bills and code violations far exceed any reasonable price for the property. And the sad fact is that Baltimore City would rather have the property sit vacant than negotiate or waive the outstanding amount due.

As has been said here and elsewhere in Bigger Pockets, there are investors who know how to make money in the D-class rental areas. The cash flow is amazing, but you must run a tight ship and understand the potential pitfalls or you will lose your shirt (and all your other clothes as well). 

I've posted this before, but if you want to invest in a new area, my advice is to spend some time attending meetings of local investor groups to get the lay of the land. Take the time to see who the successful investors are and you may be able to pick their brain a bit at some of the meetings. 

I second the idea that any experienced plumber, GC, or even some handymen, should be able to remove the outside cover and turn on the water. 

You said that you were at the tail end of the remodel. I also don't understand how you can even start a rehab without access to water. How did your crew do the work? If you replaced or repaired any plumbing like sinks, bathtubs/showers, water heater, etc., there would have to be test of the system.

Is it possible that the water is only turned off at the incoming line inside the house? I assume that you checked that, but sometimes the answer to a problem starts with checking the obvious.

Good luck dealing with the inept water department. They haven't gotten anything right in years. Some time ago, it was incorrect billing and then it was no billing at all (one hotel hasn't paid in 10 years, even after asking to be billed)!

One thing you can do is attend local associations of investors. I would tend to stay away from many of the Meetup groups as they are either too small or run by someone who wants to sell you an expensive coaching program. That being said, when you attend one of these groups, see if someone has a "scope of work" that they will share or sell you at a reasonable price.If not, see which investors are the ones that other people look up to as experienced and successful.

A full scope of work (i.e. checklist) should enable you to walk through a property, room by room, and note all the items that need to be fixed. Once you have that completed, you can hand a copy to a GC to get estimates. If you let the GC dictate the scope, you will most likely overimprove the property and not make the type of profits that you should. However, a good GC can save you money when they point out repairs/upgrades that will bring you more value but at a lower cost than if you do it  the way that you had in mind.

It might seem expensive to pay $100-200 to have a GC walk through a property with you, but you have to weigh that against trying to estimate rehab costs and getting it wrong by $10-20K or more.

Once you've done a few rehabs, you'll quickly learn what items to fix, how much they cost and which ones add the most value.

As has been said, your best bet is to find rentals that are relatively close to where you live. If you are going to manage these yourself or even if you have a property manager, it's helpful if you can visit the property from time to time. I know of many investors who only buy rentals in the same general area or zip code. That way, they can really understand their market rather than trying to keep tabs on properties located all over the country. 

Being in Philly, you are about 2 hours from Baltimore and that seems too far to go to own rental properties for my taste. As a native of the city and veteran investor, I do think Baltimore offers some of the best returns on the East Coast. However, there's always a trade off. Baltimore's ROI comes at the cost of having to know the city on a block-by-block basis. There are some very rough areas situated right next to some very good ones and it's easy to make a costly mistake when you don't know where the boundary is.

Before owning rentals or doing any real estate investing for that matter, I recommend that you attend local investor associations in the area where you plan to invest. In Philly, that would be DIG (Diversified Investor Group). They are one of the oldest and largest groups in the country. There, you can meet and talk to investors who are actually "on the ground" and they can give you the scoop on which areas are good and those that you need to avoid. In addition, you may find some potential money partners, agents, contractors, etc.

Whatever you decide, the important thing is to educate yourself as much as possible and then take action based on what you know.

One other point to consider: Let's say that you are contacting truly potentially motivated sellers. By texting them, you get one shot and if they are not ready to sell at the moment, you've wasted that shot. I find that my direct mail campaigns bring me leads up to 2-3 years after the piece was sent. 

Many sellers may fit the profile of motivated seller, but the decision to sell often takes weeks or months of coming to terms with the reality of the situation that is the source of the motivation to sell. And having my written letter or postcard in hand means the when they are ready to sell, my name and number are right in front of them while your text is long gone in the cloud.

I'm sure that given the sheer volume of texts that are possible, you will get some deals, but I think the success rate will be very low. 

A couple of points:

I would agree that virtual wholesaling is much easier to talk about than it is to execute successfully. As has been pointed out,  unless you are a seasoned wholesaler in your own market, you are almost certain to fail working in a distant area. 

However, I am curious as to what kind of split you get for working with wholesalers local to the market in which you are finding deals. In my estimation, you are really more like a birddog unless you are actually negotiating and have a signed contract to sell. I might pay a percentage for a really good lead, but don't like getting involved with trying to sell someone else's contract. Especially since their contract may not have the necessary protections for me and/or the seller.

I'm a full-time wholesaler in the Baltimore-DC areas and get calls from those trying to be virtual wholesalers wanting to work with me. I've found that almost every one of these people have a contract with a price that is much to high to bring to my buyers. Because they don't know the area, they agree to something close to the seller's pricing which is almost always unrealistic.

Anyway, if you are having success with "co-wholesaling," joint venturing, etc., more power to you, but I have found it's not worth my time to try and salvage the deals that other wannbe wholesalers bring to me. In addition, these people often walk away from their contracts when they discover they agreed to a price that won't work. And that just makes my job that much harder when the seller calls me to complain that they've been left in the lurch with a real estate problem that is often worse than when they met the person before me.

I would add my 2¢ to the previous posts which give some good information.

I'm a full-time wholesaler and native of Baltimore. I'm also co-founder and current president of a local REIA (real estate investment association) I can't tell you how many times I get calls from out-of-state investors who thought that cheap Baltimore properties were going to pave the way to early retirement. They are usually calling me to sell (sometimes at a steep loss) because they have had it with Baltimore and its many problems.

As stated above, Baltimore City is extremely block-by-block as well as being highly regulated and pro-tenant. 

It's possible to get 20%+ cash on cash returns, but you need to really understand this market and be ready educate yourserlf with what it will take to find, fix, and rent properties. 

Before you invest in Baltimore, you should attend some of the local investor associations so you can talk to local investors who know the lay of the land.