All Forum Posts by: Jon K.

I think market auctions are better for newer investors because you're able to see the inside of the property and the property will be delivered vacant.

If you win you will have to provide a deposit that is held in escrow until the transaction closes. The amount of this deposit is going to depend on the auction itself. They will provide this information when you register for the auction and it is usually available in the listing as well. That deposit goes towards the purchase price. You will have to pay all the usual expenses associated with buying a property: transfer taxes, government fees, title company/attorney costs, as well as a "hammer fee" which goes to the auction house.

In theory yes, you could win something for a few thousand dollars. I'd imagine at that cost you'd either be buying just a shell of a property or raw land.

There is a big difference between $50 over average top of market rent and $250 over average top of market rent.

You can ask whatever you want, and can improve a property as much as you want, but the reality is that the market sets the rent that it will bare and not the landlord. There is a limit to what most people are willing to pay to live in a given area regardless of how updated your unit is. Can you find someone willing to pay more for quality? Yes, absolutely. BUT it will likely take a while as you are experiencing.

So you have to ask yourself, is the difference in rent worth the additional months of vacancy?

Taking away debt service leaves you with $872.50/month or $10,470/year. That is roughly a 6.8% cash on cash return. That would be too low for me personally as there are other investments that yield better results for less risk.

Personal preference but I also don't buy without leverage for a number of reasons, even when the cash is available.

I have a few times. There are different types of auctions. The two types I've attended:

Foreclosure auctions. These are auctions that often literally take place on courthouse steps due to a lender foreclosing on a property due to nonpayment. You do not have the opportunity to look inside the house before bidding so you're buying sight unseen. You have to put down a large deposit if you win via cashier's check. You don't actually own the property until the sale is ratified by the courts as a foreclosure is a legal process though you are generally responsible for the property taxes for the property from the moment you win. Also, often times the original homeowners still live in the property so once the sale is ratified you have to go through the eviction process or offer cash for keys to get them to leave. So, lots of challenges and risk but you could actually end up with a good deal. You could also end up with a property that needs to be gutted from top to bottom after months of legal hassles. I wouldn't recommend this as a starting strategy for anybody.

Market Auction: There's probably a better term for this but anyone who owns a property can sell it via an auction. These are listed on the MLS through an auction house and you CAN go tour the property before-hand, often with a buyer's agent if you wish. The auction will often take place at the property although these days that's usually combined with an online auction that starts up to 2 days before the final bid is accepted. There is a suggested opening bid and a minimum bid increment.

When the physical auction takes place, bids will happen. The auctioneers will try to encourage action. When it seems like they have a final bid and no one is willing to increase it, they will often times go talk to the owner for a few minutes. The owner is under absolutely no obligation to accept any bid or to even sell the property. They will come back and give one last opportunity for bids. If there are some, it continues. If not, they'll announce the winner assuming the owner is happy with the result. Again, often times this requires a large down payment when you win to be held in escrow as things go to title. Also, there is usually a "hammer fee" which is a % of the total purchase price to be paid to the auction house by the BUYER.

Again, you can get good deals this way and you actually can tour the property beforehand so you generally know what you're getting into. In my experience, most properties that go to auction end up overpriced so I'd be prepared to attend a LOT in order to get something that worked on paper.

When I attended my first market auction with an experienced agent the advice he gave me was to figure out my maximum beforehand and stick to it (Seems obvious but people get caught up in winning). Also, don't bid until they are approaching your max. Wait until you're about 3 minimum increments away from your max, then come in with a 2X increment increase. Having someone come in late in the bidding process who is jumping by more than the minimum CAN help shut action down. This was just advice of course, no guarantees of results.

Regardless of the type of auction, once you own the property you can do anything legal that you want with it. So yes, you can fix and flip, or hold as a rental, or whatever.

I wouldn't buy it. You mention the ARV so I'm assuming you're either BRRRRing or using a loan to purchase. If you're BRRRRing this property your 150k loan payment is going to be around $1,000 on top of the taxes and insurance. You also haven't accounted for capital expenses, vacancies, maintenance, or the solar panel payment in your cash flow calculation. When underwriting I usually use 5% of gross rent for cap-ex, vacancies and maintenance as place-holders/quick rule of thumb absent better data. You also haven't left room for property management (if you intend to use it).

So long story short, if you're BRRRRing or using a mortgage to obtain the property you are going to be cashflow negative or close to it:

$1,150 - $1,000 - $90 - $62.50 - $62.50 - $62.50 = -$127.50

My personal criteria is that I won't buy any single family rental unless it cash flows $250/month after all average expenses and provides a minimum of a 20% cash on cash return.

A local (to you) real estate attorney.

I have a few websites for you:

https://www.city-data.com/
https://www.neighborhoodscout.com/
https://www.recenter.tamu.edu/ (see data tab)

And I didn't see you mention schools:

https://www.greatschools.org/

You've heard correctly. Neighborhoods in Baltimore City can be as small as a city block. In some areas you can have houses selling for 500k+ just two streets away from board-ups and broken glass. It is a tough market to master and overall the city has lost population every year for the past 20 years. It's not for me but I know people who invest heavily there and do well. I wholesale everything I get under contract in the city.

My advice is if you're not from the area, you need experienced boots on the ground or you will be sad.

There are several large, active investor groups on Facebook for Baltimore. I'd also suggest you find and join them.

If you decide your end goal is to sell it and you want to increase the amount of money you will receive from selling the property then before you do a single thing to it, find a realtor that you trust and discuss it with them. Most good realtors will be able to tell you what improvements will increase the value of the house by more than the cost of the improvement. They will also likely have connections with contractors.

My rental portfolio had a tough month this month. Out of 19 rentals, I had to replace an entire HVAC system, a furnace in another property, a flat roof, a refrigerator, and a dryer. I also had three vacancies and two non-paying tenants. On the surface, this objectively sucked.

This is the first month in a very long time that my cash flow isn't covering the mortgages. And that's fine, because I have reserves and this is a long game.

Now that the month is coming to an end, I had the urge to add up the principal portions of all 19 of my mortgage payments. What I found was despite all the challenges, when you include debt pay-down I only "lost" $678.31 this month. That is truly incredible. I think it's easy to get lost in the grind sometimes and it's good to take a step back and appreciate what you have accomplished.