All Forum Posts by: Sherman Ragland

@Ian Barnes - thanks for the response.  

My perspective is from someone who lived in Baltimore (1980's) went to DC (Old Town Alexandria, VA) and then came back. My advice is especially for folks heading to Baltimore from the DC market. People who may have first hand experience buying "crappy" properties in (and around) DC and making serious money in 2-3 years, just because it's DC.

As we know, Baltimore doesn’t work that way.  It’s true that if you invest 30+ years of your life (like we have) getting to know Baltimore, you can pretty much buy anything/anywhere and still make money, if you do it right. My best cash flowing property is a 12-unit “in the hood”.  

My comments, again are directed towards the “first timer” heading to Baltimore from DC who wants to avoid some if the pitfalls others (from DC) have experienced by expecting the market to behave in a way they are probably used to, South of 695...

P.s. I seriously disagree, however, that most properties in Baltimore (at least the ones rehabbers go after) are younger than 60 years, but 60 years is not the issue. Lead paint and Baltimore’s (court system) way of going after Landlords when kids have been exposed to lead paint in their units.  It is no where near as big an issue, outside of Baltimore City.

@Ian Barnes - curious, do you manage your own rentals?

@Linda S. - Generally, I wholeheartedly agree, but there are two things (three really) that are unique to Baltimore (at least I think they are unique to Baltimore)...

1) Baltimore is very aggressive when it comes to historic preservation.  As a result, the average age of properties in Baltimore City is close to 80-100 years in age.  The cost to rehab is almost the same as building new from the ground up.  Not a problem, EXCEPT... cost to build is about $125/s.f. to $150/s.f.  With average home values well below $90K, you have to pick and choose wisely;

2) The vast majority of homes were built (and rebuilt) before 1978, which means lead paint, and often times DIP plumbing.  DIP plumbing is just expensive, especially when it fails in the street as the city is not going to repair it.  Lead paint, however is a significant problem as the Court system in Baltimore is very quick to go after Landlords who do not 100% remove the lead paint when a child in the city develops elevated lead levels.  Many investors outside of Baltimore do not have to deal with this issue;

3) As you know, Section 8 is a Federal program, but administered by the states and Cities (population over 50,000).  In order to provide for as many participants as possible, Baltimore City Routinely REDUCES the Section 8 Voucher payments, from year to year.  Further, Baltimore City Housing will withhold payments if the tenant complains. Problem with this is that a Landlord may not know if a tenant has complained until the check does not arrive.  It is not uncommon for Landlords to go for 2 months out of the year with no Section 8 Payment, or be forced to reduce what they charge by $50.00 to $100.00 a month if the City decides to (unilaterally) reduce your Section 8 voucher.  This can become a "cascading" effect if you have multiple tenants.  As soon as the reduce the rent on 1, they use the lower rent as justification to reduce the rents on future renewals.

Again, I have done business in Baltimore City, Prince George's County, Howard County, and Washington DC and have never seen what happens in Baltimore happen outside of Baltimore.

@Ozzy Sirimsi no worries, that’s what forums are for...

@Ozzy Sirimsi - I say "Fools Gold" because despite the cheap price, the cost to fix up the property will exceed the values for the neighborhood.  Many investors who come from outside Baltimore make this mistake and (almost) always get burned.  One reason for this is the age of the housing stock.  In Capitol Heights, just outside D.C.,  I can get a house for $80,000, but only have to pay $35,000 to fix it up because the average age of the houses is 40-50 years, versus Baltimore where things are 100-120 years old and need everything to get back into a decent shape.  Being cheap doesn't work if you have to spend an average of $80,000 to $120,000 in repairs to get it working and remove the lead paint.

@Lamont Marable - Yup its me!  PM me and we can work out a time to meet.

@Ozzy Sirimsi $17K Baltimore Houses are (often) "fools gold". They'll cost you $80K to rebuild in a neighborhood where ARV's are $60K to $70K. Investors (usually from DC and NYC) come to Baltimore frequently seeing these $17K "treasurers" and usually hear back home broken and defeated 6-12 months later.

Last point, for anyone looking at Baltimore, lead paint is a (very) real issue. The lead judge believes that Landlords should have unlimited liability in lead paint cases. Unless you have the money to remove (all) the lead paint from the house, you’re best staying away from buy/hold. 

@Lavaud Charlemagne - would not do spreadsheets etc on an iPhone.

I’d probably use my MacBook for spreadsheets cause I’m old fashion that way.

Contract review and signing can be done on an iPhone (especially with Docusign) but an iPad (with or without external keyboard) is probably even easier than on a laptop if you’re a mobile person.

@Lamont Marable - cut my teeth in Baltimore over 15 years ago after getting started in Capitol Heights. Best deal ever was $120,000 on one 3/2 townhouse near Hopkins Unuversity, also lost money too...

Here are my five rules for buy/hold in Baltimore (especially) if you’re coming from the DC market...

Rule #1 Baltimore is NOT D.C.

Rule #2 Don’t forget rule #1

Rule #3 Everything walking distance to the water is gold. Note actual walking. If you can see it, but are too afraid to walk through the neighborhood to get to it, it’s not “walking distance”

Rule #4 If it’s not walking distance to water, it needs to be walking distance to an anchoring institution.  In Baltimore City, the things that keep neighborhoods from falling apart are major employers like Hopkins (Hospital and Unjversity), MICA, Mercy, Stratford etc. they have sweetheart deals with the city, whereby they keep on expanding their footprint and improving the neighborhoods where they’re located.  These are the major employers and catalyst for positive change in their neighborhoods.

Rule #5 If you can’t be near the water, or near an anchoring institution... leave it alone.

Even with these five rules, basic real estate common sense still needs to be applied.

Sherman

P.s. I’m building a 22 unit apartment in Konestown and in negotiations to do a 120 room hotel downtown so I’m in Baltimore a couple of t8mes a week. Happy to show you around...